Municipals remain strong against Treasuries; Virginia's Arlington County brings $80.48 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, July 15 - Municipals continued to be attractive to investors on Wednesday, said a market insider, as Treasuries continue to suffer weakness.

"Compared to Treasuries, we're looking pretty good," said the trader.

"Right in the middle of the yield curve is looking particularly good. Yields are down by about 2 or 3 basis points. The rest looks fairly flat."

The municipal market has seen yields remain fairly stable in recent days, another market insider said.

"There hasn't been quite so much supply," said Janney Montgomery Scott LLC vice president and municipal analyst Tom Kozlik.

"High-grade muni yields are a little higher today," he said on Wednesday, and are expected higher still as the market looks to "soak up all that supply" coming in the next few weeks.

In California, spreads of the general obligation bonds to high-grade municipal issues are off their June highs at 190 bps over MMD, he said, whereas in May the bonds saw spreads of 100 bps over MMD. In the year preceding, spreads had been as tight as 65 bps over MMD.

Within the past two to three weeks, spreads have looked closer to MMD plus 180 bps as the most shocking aspects of the Sacramento budget crisis have been "worked in," he said.

Even Moody's downgrade to Baa1 from A2 on Tuesday was built in, he said.

Since the story came to the forefront, the spreads have been largely range-bound.

"I don't know what it's going to take to move it again," Kozlik said.

Arlington brings $80 million

Among Wednesday's primary action was $80.48 million in G.O. public improvement and refunding bonds from the Arlington County, Va. The bonds (Aaa/AAA/AAA) were sold at a true interest cost of 3.07%, according to Sarah Greear, a Public Financial Management Inc. senior managing consultant.

The deal went very well, Greear said.

Many investors are out for higher yields, but Arlington found buyers, she said.

"We saw great demand," she added.

The $54.115 million 2009A bonds due 2010 to 2029 and the $7.4 million 2009B bonds due 2010 to 2014 were sold to retail investors. Morgan Stanley & Co. Inc. led the selling group.

The auction for the $18.965 million series 2009C bonds due 2010 to 2013 was won by J.P. Morgan Securities Inc.

Public Financial Management acted as financial adviser.

Proceeds will be used to make public improvements to the county and refund existing debt.

The county seat is located in Arlington, Va.

U. of Missouri sells part of deal

Also on Wednesday, the University of Missouri sold $75 million in tax-exempt revenue bonds - part of the university's planned $327 million sale of bonds. The pricing terms of the remainder of the bonds were not available.

The series 2009B tax-exempt bonds (Aa2/AA/) are due 2010 to 2021 with yields from 0.75% to 3.62%.

JPMorgan was the senior manager.

Proceeds will be used to renovate several of the university system's campuses.

The remainder of the bonds are federally taxable Build America Bonds.

Pennsylvania Turnpike to price

Moving to upcoming sales, the Pennsylvania Turnpike Commission will sell $956.7 million in series 2009B-C subordinate revenue bonds, according to a preliminary offering statement.

The $213.505 million series 2009B serial bonds will carry maturities from 2012 to 2019. Term bonds worth $166.920 million, $79.490 million and $396.785 million will mature in 2024, 2029 and 2039, respectively.

The commission will also sell two $50 million series 2009C bonds with maturities from 2025 to 2033 and 2030 to 2033.

A retail order period will be held on Monday with pricing on Tuesday.

Citigroup Global Markets Inc. will act as lead underwriter.

Proceeds will be used to fund transportation grants to mass transit agencies and for various turnpike projects.

The Pennsylvania Turnpike Commission is located in Harrisburg.

Brotherly bonds

Philadelphia will sell approximately $275 million in tax and revenue anticipation notes (Baa1/BBB/BBB+), according to the city's web site.

The bonds are expected in August to fulfill routine cash flow needs.

No offering statement has been released.

Colorado to sell TRANs

Looking to Thursday's pricing activity, the State of Colorado plans to sell $255 million in series 2009A education loan program tax and revenue anticipation notes on Thursday, said a preliminary official statement.

The notes (MIG 1/SP-1+/) will be sold on a competitive basis with RBC Capital Markets Inc. as the financial adviser.

The notes are due Aug. 12, 2010.

Proceeds will be used to make loans to educational facilities throughout the state to make up deficits.

Secondary remains firm

In the secondary market Wednesday, a trader told Prospect News that there was a good amount of interest in bonds near the middle of the yield curve.

"We're seeing good amount of demand for stuff between 10 and 20 years," she noted.

The Georgia State Higher Education Facilities Authority's revenue bonds were moving. The 4.25% 2018 bonds were seen at 4%.The 4% 2017s were seen at 4.07%. On the longer end, the 5.5% 2034 bonds were seen at 5.413%.

Elsewhere, the State of Iowa saw its I-Jobs Program bonds moving in the secondary market. The 4.25% 2024s were seen at 4.08%. The bonds priced Tuesday at par.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.