Munis mixed on light trading action; expected new issues dive to $3 billion ahead of holiday

By Sheri Kasprzak

New York, June 30 – Municipals ended slightly mixed on the session as the market prepared for a decreased new-issue calendar ahead of the Independence Day holiday, market insiders said.

Monday saw very light trading, with about $3 billion of transactions seen by the end of the day, said one trader.

Yields were a touch higher on the short-to-intermediate portion of the curve with longer bonds seeing yields fall.

Treasuries, meanwhile, got a boost from quarter-end government bond purchases. Munis largely ignored these movements.

Muni index returns 6.1%

Moving to data, the S&P Municipal Bond index has returned 6.1% year to date and is off to its best midyear return since June 2009, said Kevin Horan, director of fixed-income indexes with S&P Dow Jones Indices, on Monday.

“Yields have remained relatively stable at 3.96% on a tax-equivalent basis after having started the year at 5.06%,” Horan wrote.

Meanwhile, high-yield munis, as tracked in the S&P Municipal Bond High Yield index, have outperformed their corporate junk bond counterparts, returning 8.97% for the year to date, Horan said.

Supply takes a dive

The market will see a much-lighter new-issue calendar this week, with just over $3 billion of new offerings expected to price ahead of the July 4th holiday.

“The supply side of the municipal market is not so strong this week, a predictable result of the holiday-shortened week. Issuers will typically schedule pricings around vacation schedules of those on the buy side,” said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

“With the Fourth of July holiday coming up, it is likely many buyside decision makers will be exercising their American right to pursue happiness, especially considering the early close on Thursday. ...”

In contrast, last week saw almost $9 billion of new issues.

The largest offering of the week comes from the Alabama Public School and College Authority, which is on the competitive calendar Tuesday with a $554.52 million offering.

The authority intends to price capital improvement refunding bonds, which are due 2019 to 2027.

Proceeds will be used to refund the authority’s series 2007 capital improvement bonds.

Lancaster Port deal set

Another major offering ahead in the week comes from the Lancaster Port Authority of Ohio.

The authority is on tap to price $321.63 million of gas supply revenue refunding bonds, which will be used to refund its series 2008 revenue bonds issued to prepay for a natural gas acquisition.

The bonds will be offered through RBC Capital Markets LLC and are due 2015 to 2019 with a term bond due in 2038.

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