Municipals make gains as secondary action improves; Massachusetts School Building sells notes

By Sheri Kasprzak

New York, July 10 – Municipals extended gains from Wednesday, with yields seen lower by about 1 basis point across the curve, even as Treasuries, particularly long bonds, retreated slightly, market insiders reported.

A trader reached in the afternoon said municipals were buoyed by stronger secondary market action and improved Treasuries early on in the session. Treasuries, however, turned during the afternoon and ended mixed.

Selling pressure remained light, the trader noted.

Massachusetts school notes sold

Heading up the day’s primary action, the Massachusetts School Building Authority hit the market with $300 million of series 2014A subordinated dedicated sales tax bond anticipation notes.

The notes (MIG 1/SP-1+/F1+) were sold competitively. BofA Merrill Lynch won a $150 million portion of the notes, U.S. Bancorp Investments Inc. took a $50 million piece, and J.P. Morgan Securities LLC took a $100 million piece. The weighted average true interest cost was 0.098756%.

The notes are due July 16, 2015. Of the notes, $100 million have a 1% coupon and priced at 100.896, $150 million have a 5% coupon and priced at 104.893, and $50 million have a 1.5% coupon and priced at 101.404.

“This is the first time we’ve ever sold one-year securities,” Ken Wissman, the authority’s chief financial adviser, said in an interview Thursday.

“If you want to compare it to an earlier transaction, there was that similar deal in Colorado yesterday [Wednesday] which was at 0.105% [yield].”

The State of Colorado came to market with $165 million of tax revenue anticipation notes Wednesday at a 0.10951% TIC.

The authority chose to come to market now not because of a sudden rush of education loan program offerings but because it needed the cash.

“Short-term rates are attractive,” Wissman noted.

Proceeds will be used to finance grants to cities, towns and other local entities for school construction and improvement projects.

Massachusetts Port prices

In other pricing news, the Massachusetts Port Authority sold $294.82 million of series 2014 revenue bonds.

The offering included $45,455,000 of series 2014A non-AMT bonds, $48.23 million of series 2014B AMT bonds and $156,135,000 of series 2014C non-AMT refunding bonds, according to pricing sheets.

The 2014A bonds are due 2017 to 2034 with term bonds due in 2039 and 2044. The serial coupons range from 2% to 5% with 0.67% to 3.52% yields. The 2039 bonds have a 5% coupon and priced at 110.391 to yield 3.74%. The 2044 bonds have a 5% coupon and priced at 109.868 to yield 3.80%.

The 2014B bonds are due 2017 to 2031 with term bonds due in 2034, 2039 and 2044. The serial coupons range from 4% to 5% with yields from 0.86% to 3.67%. The 2034 bonds have a 5% coupon and priced at 109.868 to yield 3.80%, and the 2039 bonds have a 5% coupon and priced at 107.888 to yield 4.03%. The 2044 bonds have a 5% coupon and priced at 107.463 to yield 4.08%.

The 2014C bonds are due 2015 to 2035 with coupons from 2% to 5% and yields from 0.14% to 3.56%.

The bonds (Aa3/AA-/AA) were sold through Raymond James/Morgan Keegan.

Proceeds will be used to refund the authority’s series 2012A commercial paper notes and its series 2003A, 2003C and 2005A revenue bonds.

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