Municipals firm in sympathy with Treasuries as pressure continues; California sells G.O. debt

By Sheri Kasprzak

New York, Aug. 27 - Municipals were firmer on Tuesday, but most of that firmness was in sympathy with Treasuries, market insiders reported.

Yields weren't moved by that much, said a trader in the afternoon, and it's likely that the firmer tone was more a result of an improved Treasuries market than any real strength in the municipals market.

"This is not a trend; this is headlines," he said.

"There's still quite a bit of pressure. Investors are skittish. Any firmness out there today is all about Treasuries and this news out of Syria. I think it really is having a far-reaching impact on the markets. We're just getting some of that."

Even though municipals weren't moved by that much, Treasuries saw big gains on Tuesday. The 10-year note yield was down 7 basis points to close out the session at 2.723%, and the five-year note yield was down 6.5 bps to close at 1.529%. The 30-year bond yield was down 6 bps to close at 3.707%.

Meanwhile, stocks took a dive on the news. The Dow Jones industrial average fell 106 points to end at 14,839.57, and the S&P 500 index fell 14.14 points to close at 1,642.64. The Nasdaq closed down 37.32 points at 3,620.27.

California brings G.O. bonds

Heading up the day's long-term bond offerings, the State of California sold $764,025,000 of series 2013 various purpose general obligation bonds. The full terms of the offering were not immediately available Tuesday evening, but yields reportedly ranged from 0.2% to 4.8%.

The bonds (A1/A/A) were sold competitively.

Proceeds will be used to fund certain capital projects, repay outstanding commercial paper and current refund debt for a debt service savings.

Texas sells notes

One of the year's largest deals hit the market Tuesday. The State of Texas sold $7.2 billion of series 2013 tax and revenue anticipation notes.

The notes (MIG 1/SP-1+/F1+) were sold competitively. Wells Fargo Bank, NA, RBC Capital Markets LLC, BofA Merrill Lynch, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Citigroup Global Markets Inc. and Goldman Sachs & Co. all took portions of the offering at a weighted net interest cost of 0.20078389485%.

The notes are due Aug. 28, 2014 and bear interest at 2% to yield 0.19%.

Proceeds will be used to fulfill operating cash shortfalls during the coming fiscal year.

The state last hit the market with short-term notes in August 2012. The state then sold $9.8 billion of TRANs at a weighted average net interest cost of 0.22529938776%.

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