Municipals improve as bulk of week's deals price; New York City Water offers $547.9 million

By Sheri Kasprzak

New York, March 25 - Municipals, particularly in the middle of the curve, were somewhat improved on Tuesday as the bulk of the new issues for the week priced, market sources said.

There was a softer tone on the short end, said a trader, but the tone for intermediate to long bonds was mostly firm.

"Demand is still there, but volume is still low," a source said during the afternoon.

The yield curve has been flattening along with Treasuries, but Treasuries reversed direction on Tuesday with the Treasury curve steepening somewhat.

New York Muni Water bonds price

Amid Tuesday's primary activity, the New York City Municipal Water Finance Authority sold $547,895,000 of series 2014DD water and sewer system second general resolution revenue bonds.

The bonds (Aa2/AA+/AA+) were sold through Barclays.

The bonds are due 2022 to 2025 and 2034 to 2035 with a term bond due in 2039, said a pricing sheet. The serial coupons range from 3% to 5%. The 2039 bonds have a 4.25% coupon that priced at 98.623, a 4.5% coupon that priced at 101.301 and a 5% coupon that priced at 107.09.

In preliminary pricing for the 2039 bonds, the yield came in at 4.31%.

Proceeds will be used to redeem existing debt.

Detroit deal ahead

Looking out on the horizon, the Detroit Water and Sewerage Department is expected to offer up $150 million of debt in June, said Alan Schankel, managing director with Janney Montgomery Scott LLC. The bonds will reportedly be sold through the Michigan Finance Authority.

News of the offering comes just as Standard & Poor's cut the department's revenue bonds to CCC.

"The emergency manager's plan is to lease the city's utility system to a new regional water and sewer authority," Schankel said.

"Under the proposal, current bondholders would receive new bonds issued by the new regional authority in exchange for existing bonds. The new authority's annual lease payment to the city would be paid on a priority basis to debt service, effectively subordinating debt service."

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