Long bonds take another major hit; New Jersey Economic Development sells $900.7 million bonds

By Sheri Kasprzak

New York, Jan. 13 - Weakness once again plagued the municipals market, with long bonds hit particularly hard. Bonds out beyond 30 years were seen up by 8 to 10 basis points, said market insiders, bringing yields to the highest levels in about two years.

"It's been a tough day," said one trader. "There's a huge amount of volatility in the market right now, and investors are sweating over that. It's amazing to me that someone can utter the word 'bankrupt,' and all hell breaks loose. It's an incredibly sensitive market right now, and even the slightest hint that something bad is going to happen sends us into a spiral."

Heading up the primary market action for Thursday was the New Jersey Economic Development Authority's sale of $900.7 million of series 2011 school facility construction bonds. The authority originally planned to sell $1.645 million of the bonds, but the offering was reportedly cut nearly in half after comments from New Jersey Gov. Chris Christie that health-care costs could "bankrupt" the state.

The sale included $777.5 million of series 2011 tax-exempt bonds and $123.2 million of series 2011 taxable bonds.

The 2011 tax-exempt bonds are due 2014 to 2025 with coupons from 3% to 5.25%. The 2011 taxable bonds are due 2012 to 2015 with 2.143% to 3.719% coupons, all priced at par.

Bank of America Merrill Lynch was the senior manager for the bonds (Aa3/AA-/AA-).

Proceeds will be used to refund variable-rate demand bonds to either fixed-rate bonds or floating-rate notes as well as terminate swap agreements.

New York school bonds price

In other news, the New York City Educational Construction Fund on Thursday priced $136.96 million of series 2011A revenue bonds, said a pricing sheet.

The bonds (Aa3) were sold competitively. Calls to the issuer for the winning bidder were not immediately returned Thursday.

The bonds are due 2017 to 2028 with term bonds due 2033 and 2041. The serial coupons range from 3.25% to 6.5%. The 2033 bonds have a 5.75% coupon priced at 98.451, and the 2041 bonds have a 5.75% coupon priced at 96.523.

Proceeds will be used to construct the High School for Art and Design and P.S. 59 Combined Occupancy Structure at Second Avenue between 56th and 57th streets in New York.

The fund is responsible for funding school construction and additions.

Chicago preps deal

Looking to upcoming sales, the City of Chicago is expected to price $288 million of series 2011C -1 taxable project general obligation bonds, said a preliminary official statement.

The bonds will be sold through Loop Capital Markets LLC.

Proceeds will be used to make public right-of-way infrastructure improvements in city neighborhoods, including alley and street construction, lighting improvements, sidewalk reconstruction, street resurfacing, bridge rehabilitation and traffic signal installation.

Philly sets hospital sale

Also coming up, the Hospitals and Higher Education Facilities Authority of Philadelphia is gearing up to sell $200 million of series 2011A hospital revenue bonds for the Children's Hospital of Philadelphia, said a preliminary official statement.

The bonds (Aa2/AA/) will be sold on a negotiated basis with J.P. Morgan Securities LLC as the senior manager.

Proceeds will be used to construct a five-story ambulatory care center at the hospital and to make other repairs, renovations and expansions at the hospital.

The authority provides funding to hospitals and higher educational facilities within the city.

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