Municipal yields rise with Treasuries as deals price; New York Urban Development prices

By Sheri Kasprzak

New York, Dec. 2 – Municipals closed the session weaker following struggling Treasuries, market insiders said.

Municipal yields were reportedly higher by 2 basis points to 3 bps, outperforming Treasuries, which were softer by as much as 7 bps on the short end.

Increased primary supply kept yields from sinking too far, said a trader.

“The focus on the market is primary. We’re getting ready to digest a substantial amount of deals,” said a trader in the afternoon.

“It’s the largest single week of new issues so far this year. We seem to be closing out the year on a strong note with supply.”

Urban Development deal prices

Heading up the day’s primary activity, the New York State Urban Development Corp. priced $1,266,525,000 of state personal income tax bonds on Tuesday, but by press time Tuesday evening, the details were still being hammered out, said a source close to the deal.

The offering was downsized from $1,310,325,000.

The bonds (/AAA/AA+) were sold competitively, and proceeds from the deal will be used to finance highway and bridge, correctional system, housing, economic development and state facilities projects, as well as to refund the corporation’s series 2005A-1 economic development and housing, series 2007A economic development and housing, series 2005B state facilities, series 2005A economic development and housing, series 2006A economic development and housing, series 2007A economic development and housing, series 2005A transportation and series 2006A transportation state personal income tax bonds.

Demand remains strong

The demand for tax-free bonds remains strong as the year winds down, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Lipper reported mutual fund inflows of $564 million for the week ended Nov. 28, the 20th consecutive week of positive flows, Schankel said.

Metro water deal prices

Looking to Tuesday’s competitive offerings, the Metropolitan Water District of Southern California offered up $51.15 million of series 2014A waterworks general obligation refunding bonds.

The bonds (Aaa/AAA/AAA) were sold competitively. BofA Merrill Lynch won the bid at a 0.913881% true interest cost, said Gary Breaux, the district’s chief financial officer.

“Given the small size of approximately $50 million, short final maturity of 2021 and AAA rating from all three rating agencies, we felt we could get the best price through a competitive sale,” Breaux said in an interview Tuesday afternoon.

The bonds are due 2016 to 2021 with 2% to 5% coupons, according to a pricing sheet.

Proceeds will be used to refund existing waterworks G.O. bonds.

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