Municipals firm but underperform rallying Treasuries; Dasny to price $1 billion revenue bonds

By Sheri Kasprzak

New York, Oct. 14 – Municipal prices climbed on Tuesday but underperformed rallying Treasuries, market sources said.

The 10-year muni yield fell by about 8 basis points, the biggest mover of the day. Shorter and longer bonds were down by 1 bp to 3 bps, said a trader in the afternoon.

Meanwhile, international economic fears pushed investors toward Treasuries, sparking a rally in which the 10-year benchmark yield fell by 10 bps during the session to end at 2.21%, the five-year note yield fell by 10 bps to 1.45% and the 30-year bond yield fell by 8 bps to end at 2.95%.

Despite the Columbus Day holiday, new-issue action will remain high this week with about $7.4 billion of new offerings slated. The offerings are led by a $1 billion deal from the Dormitory Authority of the State of New York.

Dasny deal ahead

That $1 billion offering of state sales tax revenue bonds (Aa1/AAA/) will be sold through BofA Merrill Lynch, Jefferies & Co. and Ramirez & Co. Inc.

The sale includes $963.5 million of series 2014A tax-exempt bonds and $36.5 million of series 2014B taxable bonds.

Proceeds will be used to finance capital improvements at the City University of New York; road, highway, parkway and bridge improvements under the state’s Dedicated Highway and Bridge Trust Fund program; state grants for libraries; the construction of a state court officer’s training facility in Brooklyn; and hazardous waste remediation.

Washington preps G.O. deal

Heading up the week’s competitive offerings, Washington will hit the market on Wednesday with $764.66 million of series 2014 G.O. refunding bonds (Aa1/AA+/AA+).

The deal includes $526.06 million of series R-2015C various purpose G.O. refunding bonds and $238.6 million of series R-2015D motor vehicle fuel tax G.O. refunding bonds.

The proceeds will be used to refund the state’s series 2005A, 2007C, 2007F, 2008A and 2008C various purpose G.O. bonds and its series R-2005B, 2007D, 2008B and 2008D motor vehicle fuel tax G.O. bonds.

Puerto Rico GDB sells notes

Looking to new offerings, the Government Development Bank of Puerto Rico sold $900 million of guaranteed notes due June 2015.

Of the notes, $700 million bear interest at 7.75%. The remaining $200 million is a revolving line of credit that bears interest at one-month Libor plus 775 bps.

Proceeds from the offering will be lent to the Treasury so the Treasury will gain $1.2 billion of new liquidity.

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