Municipals climb on stronger Treasuries; California details $971.63 million G.O. bond offering

By Sheri Kasprzak

New York, Oct. 21 – Municipals closed Wednesday stronger as Treasuries got a boost from weaker commodities, traders reported.

Yields on top-rated munis were lower by as much as 4 basis points, said a trader in the afternoon.

Meanwhile, the 30-year Treasury bond yield fell by 5 bps and the 10-year note yield fell by 4 bps after the United States reportedly had the largest crude oil surplus in six months, sending December oil futures down 3.1%.

In other broad muni news, Federal Reserve data indicates that outstanding municipal debt of $3.71 trillion at the end of the second quarter was 1.6% below the record $3.78 trillion from the first quarter of 2011. Issuance averaged $149 billion annually between 2010 and 2015, compared with $256 billion on average in the previous five years.

California offers G.O. bonds

Among the larger muni offerings for the week, the State of California sold $971.63 million of series 2015 various purpose general obligation bonds. The deal was upsized from $960.96 million.

The deal included $105.96 million of series 2015 taxable bonds and $865.67 million of series 2015 tax-exempt bonds.

The taxable bonds are due 2016 to 2017 with 0.50% to 1% coupons and 0.30% to 0.72% yields.

The tax-exempt bonds are due 2016 to 2034 with 3% to 5% coupons and yields from 0.08% to 3.50%.

The bonds (Aa3/AA-/A+) were sold competitively with J.P. Morgan Securities LLC taking a portion at a 0.609% true interest cost, Goldman Sachs & Co. taking a piece at a 1.654% TIC and Citigroup Global Markets Inc. taking part of the deal at a 3.441% TIC.

Proceeds will be used to finance capital improvements at public facilities, including schools, and to refund existing bonds.

Refunding to save $160 million

The refunding portion of the deal will reportedly save the state’s general fund almost $160 million over the life of the bonds, said a statement from California treasurer John Chiang.

“This is the last general obligation bond sale of 2015,” Chiang said in the statement.

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