Munis remain off as Treasuries decline again; California brings $10 billion short-term notes

By Sheri Kasprzak

New York, Aug. 16 - Yields were slightly softer again on Thursday as weakness continued to pervade the Treasuries market, insiders reported.

Yields were off only slightly on the long end of the curve, said one trader, but it was hard for the rest of the market to make any headway, with light supply and weaker Treasuries dragging the market down.

With only $6 billion of new deals expected for the week, demand remains high despite the lagging supply.

"Not only is supply low, but Treasuries have been weaker throughout the week. That's impacting us quite a bit," a trader said.

The weakness hasn't impacted many new issues, which have been pricing well, market sources have reported during the week.

California prices $10 billion

The largest offering of the week came Thursday from the State of California, which priced $10 billion of series 2012-2013 revenue anticipation notes.

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

The deal included $2.5 billion of series 2012-2013A-1 notes due May 30, 2013 and $7.5 billion of series 2012-2013A-2 notes due June 20, 2013. The May 30 notes have a 2.5% coupon and priced at 101.665, and the June 20 notes have a 2.5% coupon and priced at 101.702.

Price talk seen 0.3% to 0.55%

"California completed the second day of retail order period on its $10 billion revenue anticipation note offering with a reported $3.2 billion in orders from individual investors for maturities in May and June 2013," Alan Schankel, managing director with Janney Montgomery Scott LLC, wrote Thursday ahead of the final pricing.

"Today, the sale should be finalized as institutional buyers weigh in."

Proceeds will be used to assist in cash management for the state's fiscal 2012-2013 fiscal year.

In other California news, Schankel said Thursday that the Golden State is also gearing up to price $1.6 billion of general obligation bonds during the week of Sept. 24, but the full details of the offering were not yet available Thursday evening.

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