Municipals cheapen amid fund selling in secondary; Connecticut offers $500 million G.O. bonds

By Sheri Kasprzak

New York, Aug. 14 - Municipal yields were cheaper again on Wednesday even as Treasuries improved, market sources reported. Brisk selling activity from mutual funds sent yields upwards slightly, said a trader reached in the afternoon.

Secondary action was the primary cause of the cheaper tone of the market, but primary offerings were also seen cheaper than price talk.

Connecticut offers G.O.s

Heading up the day's primary action, the State of Connecticut hit the market with $500 million of series 2013 general obligation bonds, said a pricing sheet.

The bonds (Aa3/AA/AA) were sold through senior manager M.R. Beal & Co.

The offering included $100 million of series 2013A taxable bonds, $115 million of series 2013D Sifma index bonds and $285 million of series 2013E bonds.

The structure of the offering was changed from its original plan. The deal originally called for $100 million of series 2013A taxable bonds, $165 million of series 2013D bonds and $235 million of series 2013E bonds.

The 2013A bonds are due 2014 to 2023 with 0.281% to 3.817% coupons. They all priced at par.

The 2013D bonds are due 2014 to 2020. All of the bonds are Sifma index variable-rate bonds.

The 2013E bonds are due 2014 to 2033 with coupons from 1% to 5%.

The state priced $235 million of the bonds during the retail order period with the 20-year maturity priced at 4.375% to yield 4.50%, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Proceeds will be used to finance various state projects.

California talked at 0.2%-0.27%

Moving to upcoming offerings, the State of California is on deck to bring $5.5 billion of series 2013-14 revenue anticipation notes through J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and De La Rosa & Co.

The notes (MIG 1/SP-1+/F1+) are due in May and June 2014. Price talk was seen in the range of 0.20% to 0.27% on Wednesday ahead of the Thursday institutional order period. The talk is indicative of the fact that short-term yields are also a factor in the steepening yield curve, in addition to higher long-term yields, market sources said.

Proceeds from that deal will be used to finance capital needs for the state for the coming fiscal year.

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