Municipal prices slip with Treasuries; California State University preps $1.1 billion deal

By Sheri Kasprzak

New York, July 10 – Municipals were off again to close out the week, falling with Treasuries, market insiders said.

Yields on top-rated municipal bonds rose by as much as 2 basis points even as yields on the 10-year and five-year Treasury notes rose by 10 bps.

It proved to be a volatile week for the muni market, with yields falling early on but jumping late in the week as international turmoil sent investors seeking safe havens at first. As Greece re-enters negotiations with creditors, some investors are more willing to take risks, sending municipal and Treasury yields back up.

Looking ahead to the coming week, the new-issue volume will take off with about $9 billion in supply expected. The two largest deals are over $1 billion.

California State deal set

Leading the heavy supply is a $1.1 billion offering of systemwide revenue bonds from California State University.

The deal includes $1.07 billion of series 2015A bonds and $30 million of series 2015B taxable bonds.

The bonds (Aa2/AA-/) will be sold through senior managers J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

The university plans to use the proceeds to construct, renovate, equip and improve university facilities and refund existing debt.

Chicago deal ahead

Another $1 billion-plus offering will hit the market in the coming week. The City of Chicago is on deck to sell $1,073,360,000 of series 2015 G.O. bonds (/BBB+/A-) through Morgan Stanley & Co. LLC.

The offering comes after Fitch Ratings removed the city from Rating Watch negative on July 3, citing the reduction of near-term liquidity risks.

“The city recently refunded its variable-rate G.O. and sales tax bonds with fixed-rate debt and terminated all associated liquidity support agreements and swaps, which were in defaulted status and subject to immediate repayment due to credit downgrades,” said a Fitch report released Friday.

“The series 2015 bonds will fix out most of the city’s short-term borrowing program, the only remaining variable-rate general government debt.”

The proceeds to repay short-term debt, terminate a sale/leaseback of the Orange Line rapid transit rail line and terminate an interest rate swap agreement related to sales tax revenue bonds.

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