Muni yields hold steady as Treasuries stabilize; week features just $1.4 billion of new deals

By Sheri Kasprzak

New York, July 5 - The muni market cranked back up following the Independence Day holiday on a more stable note, with yields seen unchanged to a basis point or so higher, market insiders reported.

Treasuries got a much-needed break on Tuesday as Moody's Investors Service dropped the long-term government bond rating of Portugal to junk. The ratings move created a demand for Treasuries after turmoil in Greece sent Treasuries into a downward spiral last week.

Intermediate municipals were seen off just a touch, by about a basis point, reported one trader.

"Longer bonds are basically unchanged. Shorter bonds are maybe a hair off, but the middle is maybe off by a basis point," he said.

Meanwhile, the week ahead is looking light on new issues. Just $1.4 billion of new deals are expected, said Alan Schankel, managing director with Janney Montgomery Scott LLC, in a report released Tuesday.

"This week will be light on the new issue front, but we expect the pace to pick up as the new fiscal year begins for many municipals borrowers," Schankel wrote.

"The volume of maturing and called bonds generally rises in the summer months, and 2011 is no exception, with at least $28 billion scheduled for redemption in July and $25 billion in August."

Schankel said he sees minimal problems with volume absorption in the coming weeks but noted that as summer ends, an increase in volume could change the current supply/demand dynamics.

"On the positive side, however, the investor demand part of the equation is showing gradual improvement," he noted.

"Flows into municipal mutual funds have been positive for seven consecutive weeks, with the $400 million of inflows during the week ending June 22 a strong indicator of improving sentiment, especially compared to the sub-$100 million average inflows of the preceding six weeks."

Wisconsin leads offerings

Heading up the week's new issues is an $800 million competitive sale of operating notes from the State of Wisconsin. As previously reported, the deal is slated to hit the market on Wednesday.

The notes are due June 15, 2012, and proceeds will fund general cash flow requirements.

Another major offering set to price during the week is a $365.5 million offering from the San Diego Community College District

The bonds (Aa1) are set to price during the week through senior manager RBC Capital Markets LLC.

Proceeds will be used to make capital improvements to the district's community college facilities.

Charleston County sets deals

Looking ahead, Charleston County of South Carolina and the county's school district will come to market with three separate offerings.

The county plans to price $241.775 million of series 2011 general obligation refunding and capital improvement transportation sales tax bonds on July 13, according to a preliminary official statement.

The bonds (Aaa/AAA/) will be sold competitively with Davenport & Co. LLC as the financial adviser.

The bonds are due 2011 to 2029, and the proceeds will fund the construction, acquisition and design of road and greenbelt projects as well as the refunding of the county's series 2006 and 2007 G.O. bonds.

On the same day, the county will sell $53.6 million of series 2011 G.O. refunding and capital improvement bonds. They will also be sold competitively with Davenport as the financial adviser.

Those bonds are due 2011 to 2031.

The county will use the proceeds to defray a portion of the costs of constructing and acquiring nursing school facilities at the Trident Technical College and the costs of acquiring, equipping, constructing and furnishing the Charleston County Law Enforcement Center as well as to advance refund the county's series 2007 G.O. bonds.

School bonds ahead

Finally, the Charleston County School District is scheduled to bring $69.855 million of series 2011 tax anticipation notes on July 12, said a notice of sale.

The notes (MIG 1) will be sold competitively with Public Financial Management Inc. as the financial adviser.

The notes are due April 1, 2012.

Proceeds will be used to finance general fund requirements for the coming fiscal year ahead of the collection of ad valorem taxes and certain state funds.

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