Oct. 19 (Bloomberg) -- The municipal market tackles its biggest week for new bond issues since June, as Minnesota and Denver-based Catholic Health Initiatives lead more than $11.3 billion in planned fixed-rate offerings.

Minnesota, home of Cargill Inc. and 3M Co., intends to bring $906 million of general obligation bonds to market. CHI, the second-largest Catholic health-care system in the U.S. after Ascension Health, seeks buyers for more than $1 billion of tax- exempt debt in three states. Both issues will refinance debt and fund new capital projects.

States, local governments and nonprofit hospitals are pressing forward with borrowing plans after buyer reluctance during the past two weeks boosted benchmark tax-exempt yields from 42-year lows. The weekly Bond Buyer 20 yield index rose since Oct. 1 by 38 basis points, or 0.38 percentage point, to 4.32 percent. The gauge of 20-year general obligation bonds remains lower than it was from February 2008 through mid- September 2009.

“Keep a sharp eye out for sizable new-issue offerings that may be ‘priced to move’ in a difficult market,” John Dillon, a fixed-income credit strategist at Morgan Stanley Smith Barney in Purchase, New York, said in a report late last week.

Weekly sales of fixed-rate municipal bonds reached $11 billion twice in the past four months, and totaled $11.9 billion for the period ended June 12, according to data compiled by Bloomberg. Issuance was $7.9 billion last week.

Benchmark yields were little changed today, according to a daily survey by Concord, Massachusetts-based independent research firm Municipal Market Advisors.

Price Concessions

After the recent sell-off, buyers may find value among the four- to 11-year maturities where sellers and issuers made the biggest price concessions, according to a report earlier today from the firm.

“With October’s correction eliminating nearly half of recent gains, there appears to be better opportunity,” Matt Fabian, the senior analyst and managing director at Municipal Market Advisors, said in the report.

Municipal bonds due in five to 10 years have lost 2.4 percent this month, compared with a 2.2 percent decline in securities due in 15 years and longer, according to indexes compiled by Bank of America Corp.’s Merrill Lynch & Co.

Lower rated and unrated bonds from “safe sectors” may grow more attractive in the near term, with possible price declines, Fabian said.

Withdrawal of Ratings

Fitch Ratings announced today that it would no longer provide credit ratings to municipal bonds based on the financial strength of the insurer without also ranking the underlying repayment risk. The rating company also said it will withdraw insured ratings for which no underlying grade exists.

The change, announced in a news release from New York and effective immediately, was prompted by “the evolution of the bond insurance industry and the volatility of insurer financial strength ratings in recent years.”

Fitch, which once assigned top AAAs to seven municipal bond insurers, downgraded and withdrew the ratings on all except two of them, now both owned by Assured Guaranty Ltd., according to data compiled by Bloomberg.

To contact the reporter on this story: Jeremy R. Cooke in New York at jcooke8@bloomberg.net.

Last Updated: October 19, 2009 16:28 EDT