Yields hold steady ahead of major supply; Los Angeles Department of Water preps large deal

By Sheri Kasprzak

New York, June 13 - Municipals got off to a sluggish start on Monday as the market awaited another large wave of new deals, said traders reached in the afternoon.

"Unmoved. Very little activity," said one trader.

Another noted that everyone in the market is waiting to see how the week's coming offerings will be digested.

"Everything hinges upon the supply we've got coming up this week," said the trader. "If there's good demand, it should be a good week. Everyone now is just watching."

The week's negotiated volume is expected to be around $4 billion, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

HFA delinquencies up

Citing a Standard & Poor's report, Kozlik also wrote on Monday that state housing finance agency loan delinquency rates reached 7.51% in the fourth quarter, up from 6.78% in the third quarter and 6.57% in the fourth quarter of 2009. The current pace is the highest on record for rated HFAs.

Delinquencies for 17 of the HFA programs exceeded those for state loans, compared with 13 in the third quarter of 2010, according to S&P.

"Kentucky Housing Corp., California Housing Finance Agency and New Jersey Housing and Mortgage Finance Agency loans were the top three in delinquencies," Kozlik wrote.

Kentucky Housing had a 19.8% delinquency rate, California Housing a 13.64% rate and New Jersey a 13.58% rate.

L.A. water to bring bonds

Heading up the fairly active primary calendar for the week ahead, the Los Angeles Department of Water and Power is ready to hit the market with $675.175 million of series 2011A power system revenue bonds through Morgan Stanley & Co. Inc.

The bonds are due 2012 to 2022, and the department intends to use the proceeds from the sale to refund its series 2001A and 2003B bonds.

New York deals to come

Several of the week's new issues will be coming out of the Empire State, led by the New York City Municipal Water Finance Authority's $500 million sale of series 2011HH water and sewer system second general resolution revenue bonds.

Those bonds (Aa2/AA+/AA+) will be sold through Morgan Keegan & Co. Inc.

The bonds are due 2026, 2029 and 2031 to 2033.

The authority intends to redeem existing first resolution revenue bonds with the proceeds from the 2011HH bonds.

Another deal comes from the New York State Thruway Authority. The authority plans to hit the market with $408.775 million of series 2011A second general highway and bridge trust funds bonds.

The bonds will be sold through Citigroup Global Markets Inc. and Ramirez & Co. Inc.

The bonds are due 2012 to 2031, and proceeds will fund projects included in the authority's multi-year highway and bridge capital plan.

New York water deal set

Also ahead, the New York State Environmental Facilities Corp. intends to price $193.56 million of series 2011C state revolving fund revenue bonds through Bank of America Merrill Lynch and Siebert Brandford Shank & Co. LLC during the week.

The bonds (Aaa/AAA/AAA) are due 2011 to 2041.

Proceeds will fund eligible drinking and clean water projects within the state.

Santee Cooper sells bonds

In other news, the South Carolina Public Service Authority, or Santee Cooper, priced recently $336.632 million of series 2011A taxable Libor index revenue obligations, said an official statement.

The offering included $20 million of bonds due Dec. 3, 2012, $148.315 million of bonds due July 1, 2013 and $168.317 million of bonds due June 2, 2014.

The 2012 bonds bear interest at one-month Libor plus 38 basis points, and the 2013 bonds bear interest at one-month Libor plus 50 bps. The 2014 bonds bear interest at one-month Libor plus 70 bps.

Goldman Sachs & Co. was the senior manager.

Proceeds will be used to retire outstanding commercial paper.

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