Municipals rise with strong Treasuries amid flight to quality; New Jersey Economic leads deals

By Sheri Kasprzak

New York, Aug. 24 – Municipals strengthened on the day, outperforming Treasuries in spots, market insiders said. Yields on top-rated munis fell by as much as 5 basis points.

Treasuries also saw yields fall by 1 bp to 4 bps on the day as investors flocked to safer investments amid a 9% dip in Chinese stocks. The rally sent the 10-year benchmark note yield below 2% in morning action. The yield eventually fell by 4 bps on the day to close at 2.01%. The 30-year bond yield fell by 1 bp to 2.73%, and the five-year note yield fell by 3 bps to 1.39%.

Looking to this week, investors will choose from about $10.4 billion of new issues, a heavy slate after supply backed off last week.

The New Jersey Economic Development Authority and the State of California will offer more than $4 billion in two offerings alone.

The Puerto Rico Aqueduct and Sewer Authority, which had been on tap to sell $750 million of revenue bonds last week, will now offer the bonds (Caa3/CCC-/CC) day-to-day after the deal was met with tepid interest from investors.

New Jersey tops calendar

Leading the week’s new issues is a $2.22 billion offering of school facilities bonds (/A-/A-) from the New Jersey Economic Development Authority. The deal is scheduled to price Tuesday.

The deal includes $500 million of series 2015WW construction bonds, $860 million of series 2015XX construction refunding bonds and $860 million of series 2015YY taxable construction refunding bonds.

The bonds will be offered through BofA Merrill Lynch.

Proceeds will be used to finance school construction projects and refund outstanding school debt.

California readies G.O. bonds

Also at the top of the calendar is a massive deal from California.

The state is scheduled to price $1.85 billion of various purpose general obligation bonds on Tuesday.

The offering will be conducted on a negotiated basis with J.P. Morgan Securities LLC leading the syndicate.

Proceeds will be used to finance capital expenditures.

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