Georgia led municipal issuers postponing $286 million in debt sales as yields in the $3.7 trillion U.S. local-securities market rose to the highest since October 2011.
Issuers had planned to sell about $9 billion in long-term debt this week, the most since April, data compiled by Bloomberg show. Georgia’s postponement today of $157 million of general-obligation borrowing joins delayed deals by municipalities including Covington, Tennessee, and Kentucky’s Fayette County School District.
“Rate increases” caused Covington, a Mississippi River city 37 miles (60 kilometers) northeast of Memphis, to shelve its $6 million general-obligation sale, said Treasurer Tina Dunn. She said in a telephone interview that she didn’t know when the municipality would try to issue the debt.
The yield on benchmark munis maturing in 10 years rose about 0.22 percentage point to 2.68 percent as of 10 a.m. in New York, data compiled by Bloomberg show. That’s the highest since October 2011.
Yields on munis increased along with those on U.S. Treasuries after Federal Reserve Chairman Ben S. Bernanke said last week the central bank plans to slow its bond-buying program this year and end its monthly purchases of federal debt and mortgage securities in mid-2014 if the economy continues to improve. That could terminate a source of demand that has suppressed interest rates.
Illinois, the lowest-rated U.S. state, still plans to proceed with a $1.3 billion sale for capital projects, said Abdon Pallasch, the assistant budget director.
The $9 billion in total scheduled sales was the most since localities borrowed about $12 billion in the week through April 12. The figure doesn’t include two $1.3 billion short-term note sales, one from Los Angeles and the other by Posey County, Indiana, which is borrowing to finance a fertilizer plant.
The long-term debt estimate for this week also doesn’t include about $3.3 billion that’s deemed day-to-day, which signals that issuers may hold off borrowing until yields stabilize or decline.
“With so many forces pushing this market cheaper, there will be a re-entry point” for investors, Dan Toboja, vice president of municipal trading at Ziegler Capital Markets in Chicago, said in an e-mail.
“Until the primary finds its footing and the secondary reflects the new market yields, we have not seen the bottom,” he said.
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