Munis end flat ahead of heavy new-issue slate; retail takes $582 million California G.O. bonds

By Sheri Kasprzak

New York, Sept. 22 – Municipals were mostly flat with a firmer tone in spots, market insiders said Monday, as investors awaited a larger new-issue calendar. About $9 billion of new offerings are expected this week.

Treasuries turned around during the session, lending some firmness to some spots on the muni yield curve, a trader said during the afternoon.

“I’d call it flat, but some shorter maturities are a bit firmer,” he said.

California sells to retail

In the week’s new-issue action, the State of California is on tap to price $2.29 billion of general obligation bonds through Citigroup Global Markets Inc. and Wells Fargo Securities LLC.

In the first retail order period Friday, retail investors took $582 million of the bonds, 25.4% of the total offering, said Alice Scott, spokeswoman for the state Treasurer’s Office. The results of Monday’s retail order period were not immediately available.

The offering will be opened up to institutional investors on Tuesday.

The bonds (A3/A/A) will be used to repay commercial paper, finance green capital projects within the state and refund existing debt.

The deal includes $940 million of various purpose G.O. bonds, $200 million of series 2014 various purpose G.O. green bonds, $950 million of series 2014 various purpose G.O. refunding bonds and $200 million of series 2014 various purpose mandatory put G.O. bonds.

“Two-hundred million dollars of the new money issuance will be for the state’s first green bonds ever,” Scott said in a statement Monday.

“Green bonds will be issued to exclusively fund projects that benefit the environment. The bonds will be sold under two measures approved by California voters in 2006 – Proposition 84 and Proposition 1B.”

Affirmation affects some munis

Some municipal credits could be impacted by Fitch Ratings’ affirmation of the United States of America’s AAA/F1+ foreign- and local-currency issuer default ratings, said a report released Monday by the agency.

Impacted munis include bonds that are wholly secured by AAA-rated U.S. government and agency obligations held in escrow, pre-refunded bonds whose repayments are wholly dependent on AAA-rated U.S. government and agency obligations held in escrow and muni housing bonds that are primarily secured by mortgage-backed securities issued by Ginnie Mae, Fannie Mae and/or Freddie Mac, said the report released by managing directors Jeff Schaub and Richard Raphael.

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