Municipal Bonds Decline, Following Treasurys' Lead
May 18, 2011
Munis were trading higher than they have all year relative to Treasurys, and that factor, combined with uncertainty surrounding Friday's employment data, caused some fund managers to be net sellers of munis. ``Given the rich valuation of municipals and the negative tone in the market, the odds seem to favor selling instead of buying municipals,'' said Bobby Denny, who manages the $1.8 billion MFS Municipal Bond Fund. The largest primary market issue priced Wednesday was the $185 million Illinois general obligation bond deal, which was won by a Morgan Stanley & Co. group in competitive bidding after it was discovered that Merrill Lynch & Co. made an error in its bid. The FGIC-insured, triple-A-rated GOs were priced to yield up to 5.97% in 2018. Morgan underwriters reported an unsold balance of $36 million, mostly in intermediate maturities. Although new issuance has been lackluster recently, the calendar is expected to pick up next week, which professionals hope will spark some life into the market. ``Our market needs a big calendar in order to increase cash flows. It forces people to pay attention and to make a decision,'' said Roberto Chambless, who manages the $3.5 billion Colonial Tax-Exempt Fund. In the secondary market, Cook County 5 7/8% securities due in 2022 ended 1/8 point lower, at 97 3/8 to 97 3/4, yielding 6.05%. September muni futures, meanwhile, underperformed Treasury futures. The muni contract ended down 20/32 to 111 10/32, and Treasurys settled 13/32 lower to 106 31/32.
VastPress 2011 Vastopolis
