Municipals get boost from improved Treasuries; Connecticut upsizes $822.38 million G.O. bonds

By Sheri Kasprzak

New York, May 20 - Municipals firmed on the day thanks to improved Treasuries, traders said late in the afternoon.

Muni yields were seen lower by 1 basis point to 2 bps, underperforming Treasuries, which got a boost from comments that potential interest rate hikes will likely be slow in coming.

The five-year Treasury note yield fell by 3 bps to end the day at 1.513%, the 10-year note yield fell by 3 bps to 2.51%, and the 30-year bond yield fell by about a basis point to close at 3.379%.

Meanwhile, municipal issuance remains extremely light, leading some market insiders to express concern that some new offerings may come at a price.

"There's at least some anecdotal evidence that spreads could be tight for some new offerings," a market source said.

"This happens when supply is light, and it has been very light for quite some time. We hope to see a reversal in the summer."

Connecticut sells G.O. bonds

Heading up the day's primary action, the State of Connecticut offered up $822.38 million of series 2014C general obligation refunding bonds. The deal was upsized from $650 million.

The bonds were sold through Morgan Stanley & Co. LLC.

The bonds are due 2014 to 2025 with 1% to 5% coupons, said a pricing sheet.

Proceeds will be used to refund the state's series 2004B and 2005C-D G.O. bonds.

New Mexico brings debt

Elsewhere during the session, the State of New Mexico hit the market with $143.77 million of series 2014A severance tax bonds.

The bonds were sold competitively with J.P. Morgan Securities LLC winning the bid at a 2.35% true interest cost, said Stephanie Schardin Clarke, director of the state's board of finance.

The bonds are due 2015 to 2024 with 2% to 5% coupons and 0.15% to 1.63% yields, according to a pricing sheet.

"Severance tax bonds may be sold at competitive or negotiated sale, but as a policy, the state board of finance always sells long-term bonds at competitive sale," Clarke said Tuesday.

Proceeds will be used to finance capital improvements approved by the state legislature.

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