Municipals weaken as supply pressure mounts; New York City Municipal Water sells $450 million

By Sheri Kasprzak

New York, Nov. 15 - Yields rose on Tuesday as the week's massive supply began to price. Several large deals slated to come to market on Wednesday and Thursday were pricing for retail investors, and a few larger deals priced for institutions, pushing yields up substantially across the curve.

Twenty-year bonds suffered the most, with yields seen up by nearly 14 basis points. Fifteen-year yields were up nearly 6 bps, and seven-year yields were up 5 bps.

"The good news is that secondary is picking up," said one trader.

"The bad news is that we're dealing with a lot of supply pressure."

When asked about the fact that the market has recently absorbed new supply fairly well, the trader said the week's supply would take a while to be absorbed.

"There is good demand, that's true, but we haven't seen this kind of supply in quite a while," he added.

Leading the day's primary action, the New York City Municipal Water Finance Authority sold $450 million of series 2012BB water and sewer system second general resolution revenue bonds, said a pricing sheet.

The bonds (Aa2/AA+/AA+) were sold on a negotiated basis. The senior manager for the offering was Barclays Capital Inc.

The bonds are due in 2039 and 2044. The 2039 bonds have a split maturity with a 4.125% coupon and a 5% coupon. The 2044 bonds also have a split maturity with a 5% coupon and a 5.25% coupon.

Proceeds will be used to fund the costs of improvements to the city's water and sewer system and to repay commercial paper notes.

Iowa student loan bonds price

Elsewhere during the session, the Iowa Student Loan Liquidity Corp. priced $419.5 million of series 2011A student loan revenue bonds in two tranches, according to term sheets.

The bonds (/A/A) were sold through Morgan Stanley & Co. LLC.

The deal included $244.25 million of series 2011A-1 bonds and $175.25 million of series 2011A-2 bonds.

The 2011A-1 bonds are due 2013 to 2023 with 2.6% to 5.3% coupons. The 2011A-2 bonds are due 2023 to 2030 with 5.3% to 5.85% coupons. All of the bonds priced at par.

Proceeds will be used to refinance eligible student loans.

North Texas brings debt

In the Lone Star State Tuesday, the North Texas Tollway Authority priced $266.28 million of series 2011B system first tier revenue refunding bonds, said a pricing sheet.

The bonds (A2/A-/) were sold through senior manager Siebert Brandford Shank & Co. LLC.

The bonds are due 2019 to 2026 with a term bond due in 2038. The bonds have 5% coupons across the board. The 2038 bonds have a 5% coupon priced at 98.278.

Proceeds will be used to refund the authority's series 1997A, 1998, 2003A and 2008E-2 revenue bonds.

Baltimore County sells G.O.s

Moving to the competitive market, Baltimore County, Md., priced $255 million of series 2011 general obligation bonds, said a pricing sheet.

The offering included $170 million of series 2011 consolidated public improvement bonds and $85 million of series 2011 metropolitan district bonds.

The consolidated public improvement bonds are due 2013 to 2032 with 3% to 5% coupons. The metropolitan district bonds are due 2013 to 2033 with term bonds due in 2035 and 2042. The serial coupons range from 3% to 5%. The 2035 bonds have a 4% coupon and priced at 99.546, and the 2042 bonds have a 4.5% coupon. Those bonds were not reoffered.

Citigroup Global Markets Inc. won the competitive bid for the bonds with a 3.323832% true interest cost, said Bob Burros, debt manager for the county.

Proceeds will be used to redeem commercial paper bond anticipation notes, which were initially issued to construct, acquire and renovate water supply, sewerage, drainage systems, waterway improvements, operational buildings, community improvements, parks and recreational facilities and affordable housing for the elderly.

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