Municipals decline again with Treasuries; California brings $5.5 billion of short-term notes

By Sheri Kasprzak

New York, Aug. 15 - Municipals weakened again on a jump in Treasury yields and some illiquidity in both the primary and secondary markets, insiders reported Thursday.

It's the third straight session of yield increases, with yields seen up 3 basis points to 5 bps across the curve. By contrast, the 10-year Treasury note yield was up 5.5 bps to end the day at a two-year high of 2.775%. The 30-year bond was up 6.5 bps at 3.819%, and the five-year note was up 4 bps at 1.524%.

"There's a lot of inconsistency in the secondary market, bid/asks are wider, and Treasuries are off, so all in all, not a really pretty day for us," a trader said in the afternoon.

California brings $5.5 billion

Heading up the day's primary action, the State of California came to market with $5.5 billion of series 2013-14 revenue anticipation notes, said a pricing sheet.

The notes (MIG 1/SP-1+/F1+) were sold through lead managers J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and De La Rosa & Co.

The offering included $1.5 billion of series 2013-14A-1 notes and $4 billion of series 2013-14A-2 notes.

The 2013-14A-1 notes are due May 28, 2014, have a 2% coupon and priced at 101.37. The 2013-14A-2 notes are due June 23, 2014, have a 2% coupon and priced at 101.477.

Price talk was seen in the range of 0.20% to 0.27% ahead of the institutional order period.

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

Reedy Creek bonds price

Elsewhere during the session, the Reedy Creek Improvement District of Florida brought $385.91 million of series 2013 ad valorem tax bonds, said a pricing sheet. The offering had been on the calendar for several months, but pricing was postponed.

The bonds (Aa3/A+/AA-) were sold through lead managers Raymond James/Morgan Keegan and JPMorgan.

The deal included $344.96 million of series 2013A bonds and $40.95 million of series 2013B refunding bonds.

The 2013A bonds are due 2020 to 2033 with a term bond due in 2038. The serial coupons range from 4.1% to 5.25% with 2.66% to 4.81% yields. The 2038 bonds have a 5% coupon and priced at par.

The 2013B bonds are due 2014 to 2024 with 1.5% to 5% coupons and 0.18% to 3.76% yields.

Proceeds will be used to finance the costs to design, construct, equip and improve roadways and parking facilities and to advance refund the outstanding series 2004 and series 2005 bonds.

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