Munis finish better by 2 bps; belly of curve holds onto rally; Kern County, Calif., preps deal

By Sheri Kasprzak

New York, June 3 - Municipals closed out a mostly positive week on a firmer note with yields lower by about 2 basis points, said traders reached during the session. Although the rally municipals experienced over the past month has waned, intermediate bonds continue to improve, according to market insiders.

"Treasuries were a little better today, and we followed suit," said one trader. "In spots, we're firmer by 2 bps."

Meanwhile, J.R. Rieger, senior vice president of fixed-income indexes at Standard & Poor's, said in a report Friday that the belly of the muni yield curve continues to rally.

"The 5- to 10-year range of municipal bonds have been seeing the biggest yield shift," Rieger wrote.

"Investment grade, tax-exempt bonds maturing in 2017 as measured by the S&P AMT-Free Municipal Series 2017 Index saw yields come down by 88 bps since their high Feb. 8. These 6-year bonds have seen a positive total return of 4.38% for the year so far."

Rieger noted that similar yield shifts were seen in the seven- to 10-year range with yields down by 81 bps since Feb. 8.

"Investors have been coming down the curve to limit both credit risk and duration risk while taking advantage of tax-exempt yields at 100% or more than U.S. Treasuries," Rieger wrote.

Kern preps sale

The week ahead will provide a slate of competitive offerings, the largest of which will come from Kern County, Calif.

The county plans to bring $200 million of series 2011-12 tax and revenue anticipation notes (/SP-1+/) with KNN Public Finance as the financial adviser.

The notes are due June 29, 2012, and the proceeds will fund expenditures for the coming fiscal year ahead of the collection of taxes and revenues.

Pricing is slated for Tuesday.

Santa Clara USD plans deal

Coming up Thursday in the competitive market, the Santa Clara Unified School District of California is set to bring $197.24 million of series 2011 general obligation bonds (/AA/).

The offering includes $81.1 million of election of 2010 series 2011 G.O. bonds, $91.14 million of election of 2004 series 2011A tax-exempt G.O. bonds and $25 million of election of 2004 series 2011B taxable G.O. bonds.

Government Financial Strategies Inc. is the financial adviser.

Proceeds will be used to fund improvements to real property for school construction.

New York City to price G.O.s

In other upcoming deals, the City of New York is expected to price $130 million of series 2011J taxable G.O. bonds Tuesday, said a preliminary official statement.

The offering includes $30 million of series 2011J-1 bonds and $100 million of series 2011J-2 bonds.

The bonds will be sold competitively with Public Resources Advisory Group and A.C. Advisory Inc. as the financial advisers.

The 2011J-1 bonds are due 2013 to 2026, and the 2011J-2 bonds are due 2017 to 2026.

Proceeds will be used to fund capital needs for the city.

Inland Valley sells TABs

In light primary action Friday, the Inland Valley Development Agency of California priced $162 million of series 2011 tax allocation bonds, said a pricing sheet.

The bonds (/A/) were sold through Barclays Capital Inc.

The offering included $65 million of series 2011A bonds, $47 million of series 2011B bonds and $50 million of series 2011C bonds.

The 2011A bonds are due March 1, 2041, and have a 4% coupon to yield 2.74%. The 2011B bonds are due March 1, 2041, and have a 4.25% coupon to yield 3.34%. The 2011C bonds are also due March 1, 2041, and have a 4.5% coupon to yield 3.68%.

Proceeds will be used to redevelop non-aviation portions of Norton Air Force Base.

Based in San Bernardino, the agency is a joint powers authority comprised of San Bernardino County, San Bernardino, Colton and Loma Linda.

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