Municipals about 4 bps cheaper as primary action dwindles; New York City sells $1 billion

By Sheri Kasprzak

New York, Dec. 13 - Municipal yields were softer by about 4 basis points, market sources reported Thursday, as the majority of the week's new issues priced, traders said. Even so, traders tried to remain optimistic, noting that losses weren't as severe as those seen earlier in the week.

"We're seeing cuts, but it's not nearly as bad as Tuesday," said a trader in the afternoon. "It's a slight correction, but I still feel that the overall tone is positive. It's possible that the new issues have put some pressure on yields, and perhaps that will change next week when supply drops off some."

Another trader also pointed to the upcoming holiday season to help yields a bit.

"Primary will quiet down next week and the week after, so that could help," said the trader.

Positive fund flows continue

Meanwhile, inflows to municipal mutual funds continue, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"ICI reported yet another week of $1 billion-plus flows to municipal mutual funds in the week ending Dec. 5, which brings 2012's total of new money to $54 billion," Schankel said Thursday.

New York City brings G.O.s

In primary activity Thursday, the City of New York priced $1,000,090,000 of series 2013 general obligation bonds, according to a pricing sheet. The offering was upsized from $862.74 million.

The deal included $520,185,000 of series 2013D bonds and $479,905,000 of series 2013E bonds.

The 2013D bonds are due 2014 to 2028 with 4% to 5% coupons.

The 2013E bonds are due 2013 to 2033 with coupons from 3% to 5% coupons.

The bonds (Aa2/AA/AA) were sold through Raymond James/Morgan Keegan.

The offering got off to a rocky start, market sources said early in the week, attracting little retail interest in its first retail order period. Pricing also suffered, said Schankel.

"In line with general muni market price erosion, yields were raised by 12 basis points in many New York City maturities, compared to Friday's first-day retail pricing," Schankel said.

Proceeds will be used to refund outstanding G.O. bonds for savings in the current fiscal year and in fiscal 2014.

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