Municipals end mostly unchanged ahead of $12 billion of new deals; UConn completes second ROP

By Sheri Kasprzak

New York, July 15 - Municipals kicked off the week mostly unmoved as the market awaited about $12 billion of new offerings.

Treasuries were improved earlier in the session, giving municipals a firmer tone, but investor apathy led to a quiet session, traders said.

"Volatility is certainly an issue, but so is the season," a trader said in the early afternoon.

"Summer always tends to be a slower time for us. We have to factor in vacation season, and I think that has a very real impact."

Many of the week's new deals will be sold on a day-to-day basis due to market volatility, said market insiders.

Market conditions are "still volatile and more unpredictable than normal," Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC, wrote Monday.

"Much uncertainty still exists for investors and issuers, although yields have fallen slightly since they hit recent highs at the end of June."

30-year AAA MMD 5 bps higher

Last week, triple-A municipal benchmark yields were flat to slightly higher with the 10-year holding steady and the 30-year AAA MMD benchmark up 5 basis points, said Kozlik. The 10-year AAA closed the week at 2.66% and the 30-year at a 4% yield.

"This is just weeks after the 10-year and 30-year yields rose 53 bps and 55 bps, respectively, in only five days. And municipal benchmarks overall were still 100 bps (10-year) and 121 bps (30-year) higher Friday versus May 2, down slightly from recent highs of 2.81% (10-year) and 4.13% (30-year) hit on June 25."

BABs sustain losses

Meanwhile, Build America Bonds have been struggling, said a report from J.R. Rieger, vice president of fixed-income indexes with S&P Dow Jones Indices.

"The S&P BAB index is still struggling after back-to-back losses in June (-3.49%) and July (-4.79%) of which July was a record loss since the inception of the index back in 2010," Rieger wrote Monday.

"Currently, the index is returning a 0.55% month-to-date and a -4.94% year-to-date."

UConn sale ahead

On Monday, the University of Connecticut completed the second retail order period for its $225 million of series 2013 general obligation bonds (Aa3/AA/AA-).

The sale includes $189 million of series 2013A G.O. bonds and $36 million of series 2013A G.O. refunding bonds.

The deal is expected to open for institutional investors Tuesday. Market insiders have reported a solid interest in the bonds during the retail order periods on Friday and Monday.

The bonds will be sold through Piper Jaffray & Co., and proceeds from the deal will be used to finance capital improvements to the university and to refund the university's series 2004A, 2005A and 2006A G.O. bonds.

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