U.S. Muni-Bond Issuance Set for Slowest Sales Week Since 2009

The $3.7 trillion U.S. municipal market is poised for the skimpiest issuance since 2009 as local- government bonds remain cheaper than Treasuries for a seventh straight week.

States and cities plan to sell about $62 million of debt in the holiday-shortened July 4 week, the least since the start of 2009 and down from $9 billion this week, data compiled by Bloomberg show.

The yield on top-rated munis maturing in 10 years rose about 0.02 percentage point this week to 1.92 percent, according to a Bloomberg Valuation index. Muni interest rates haven’t been below those on Treasuries since mid-May, data compiled by Bloomberg show.

“There’s certainly anticipation of pretty light supply next week,” said Ken Friedrich, manager of municipal sales, trading and syndication at RBC Capital Markets in New York. “The market has taken on a more positive tone in the last few days.”

Benchmark 10-year Treasury yields fell by about 0.03 percentage point this week to 1.64 percent as of about 3:30 p.m. in New York. The securities pared weekly gains as euro-area leaders relaxed terms on loans to Spanish banks as part of measures to contain the region’s debt crisis.

Yields on 10-year munis rated AAA were about 117 percent of their federal counterparts, according to data compiled by Bloomberg. The ratio, a measure of relative of value between the two asset classes, has been above 100 percent since May 16.

To contact the reporters on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net; Gillian White in New York at gwhite46@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net