Municipal yields fall 1-4 bps along with Treasuries; Los Angeles Water brings $694.13 million

By Sheri Kasprzak

New York, June 16 - Municipals continued to improve. Yields dropped anywhere from 1 basis point to 4 bps across the curve. The belly of the curve saw the most improvement, traders said, but retail investors in search of yield are heading for riskier credits.

"Short yields are as low as they can get," said one trader.

"There's no yield out there for them [retail], so they're off in search of it. Institutions are here, without a doubt. There's still a strong demand, but the dynamic is shifting in terms of who's buying what."

Still, new issues are pricing well, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

Kozlik in a report released Thursday pointed to the State of Utah's $609.92 million sale of series 2011A general obligation bonds. The 2026 bonds, the final maturity, priced at 3.48%, or 5 bps above the triple-A MMD scale, Kozlik noted.

Utah sells G.O.s

The Utah bonds (Aaa/AAA/) were priced through senior manager J.P. Morgan Securities LLC.

The bonds are due 2012 to 2026 with 2% to 5% coupons.

Proceeds will be used to fund building projects at Utah's higher education institutions and to help fund the state's ongoing highway construction program.

New York Water brings deal

Another large offering came from the New York City Municipal Water Finance Authority, which priced $662.245 million of series 2011HH water and sewer system second general resolution revenue bonds, upsized from $500 million, said a term sheet.

The bonds (Aa2/AA+/AA+) were sold through Morgan Keegan & Co. Inc.

The bonds are due 2026, 2029 and 2031 to 2032. The 2026 bonds have a split maturity with a 4% coupon priced at 100.901 and a 5% coupon priced at 109.105. The 2029 bonds have a 4% coupon priced at 97.987 and a 5% coupon priced at 106.801. The 2031 bonds have a 4.25% coupon priced at 98.804 and a 5% coupon priced at 105.297. The 2032 bonds have a 5% coupon priced at 104.555.

Kozlik noted Thursday that the longest bond was priced at 4.43%, a 46 bps spread to the MMD scale.

Proceeds will be used to redeem existing first resolution revenue bonds.

Los Angeles Water bonds price

Another water offering priced Thursday, this one from the Los Angeles Department of Water and Power. The department sold $694.13 million of series 2011A power system revenue bonds, said a pricing sheet.

The bonds (Aa3/AA-/AA-) were sold through Morgan Stanley & Co. Inc.

The bonds are due 2012 to 2022 with coupons from 2% to 5%.

Proceeds will be used to refund the department's series 2001A and 2003B bonds.

Virginia schools sell debt

Over in the competitive market, the Virginia Public School Authority sold Thursday $67.4 million of series 2011-1 school tax credit bonds, said Evelyn Whitley, director of debt management for the Virginia treasurer's office.

The bonds (Aa1/AA+/AA+) were sold competitively with Barclays Capital Inc. winning the bid. The true interest cost was 4.56951%.

The bonds are due June 15, 2027 and have a 4.5% coupon priced at par.

Proceeds will be used to purchase G.O. local school bonds issued by school districts to finance new school construction and improvements.

In late May, the authority sold $56 million of bonds competitively. Citigroup Global Markets Inc. won the bid with a 0.97133% TIC.

Citizens plans large deal

Looking ahead, the Citizens Property Insurance Corp. of Florida announced Thursday that it plans to price $900 million of series 2011A coastal account senior secured bonds.

The bonds will be sold in four tranches, but the breakdown has not been determined.

Citigroup is the senior manager, said a preliminary official statement.

Proceeds will be used to help Citizens meet its claims-paying needs for the 2011 hurricane season for its coastal account.

Based in Jacksonville, Fla., Citizens is a government entity created to provide residential and commercial property and casualty insurance to certain properties in Florida.

New York Thruway deal planned

Also ahead, the New York State Thruway Authority plans to price $880.61 million of series 2011A general revenue bond anticipation notes, said a preliminary official statement.

The BANs will be sold on a negotiated basis with RBC Capital Markets LLC and Loop Capital Markets LLC as the lead managers.

The notes are due July 12, 2012.

Proceeds will be used to fund a portion of the authority's multi-year capital plan and to refund the authority's series 2009A general fund BANs.

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