Muni market weakens slightly in response to equities; NYC's MTA brings $1.25 billion in bonds

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, April 23 - As the stock market edged its way up, the municipals market was unchanged to slightly weaker on Thursday after a couple of weeks of rallies.

The municipal market will continue to take its cues from the equity market as it wades through earnings season, a trader said.

"It definitely had a heavier tone," he said.

Still, many of the big deals the market has seen in recent sessions are slowly being well-digested.

"The [New] Jersey Turnpike [Authority] is trading well, California is trading up," the trader said, "but that stuff trades in a world of its own."

The Turnpike bonds were very popular in the secondary market Thursday. The 5% 2028s were seen trading at 4.284% after pricing Tuesday at 5.03%. The 7.414% Build America Bonds, which priced at 370 basis points over Treasuries, were seen at 6.95%.

For the larger bonds coming up, "it's not like it's not digestible," said the trader, but "there's a little bit of a pushback ... it's not going to hell in a hand basket, but it's backed off a little."

"In the long run, we'll be all right," he said.

The government still has TARP money that has not been distributed and many issuers "are waiting to see how much they're going to get," he said.

MTA prices

In primary market action, the Metropolitan Transportation Authority in New York City priced $1.25 billion in upsized series 2009 dedicated tax fund bonds, said Kevin Ortiz, spokesman for the authority.

The sale included $500 million in series 2009B tax-exempt bonds and $750 million in series 2009C Build America Bonds (/AA/A+).

The series 2009B bonds are due 2010 to 2034 with coupons from 3% to 5.25% and yields from 1.2% to 5.1%. The 3.5% 2009C bonds are due 2039, priced to yield 7.336% for a tax-exempt equivalent yield of 4.768%.

The true interest cost, Ortiz said, came to 4.92%.

The offering was upsized from its planned $650 million size. The authority originally planned to sell $450 million in series 2009B bonds and $200 million of the series 2009C Build America Bonds.

J.P. Morgan Securities Inc. was the lead manager.

Proceeds will be used to finance commuter and transit projects as well as refinance debt.

The bonds were reoffered near pricing levels. The 5.25% 2025s were seen at 4.72%, the same as at pricing. The 5.25% 2024s were also seen reoffered at pricing - 4.62%. The 5.25% 2027 bonds were reoffered at 4.88%.

The 2039 Build America Bonds were reoffered at 7.065% after dropping by as much as 36 bps, said one trader.

"MTA received very strong retail demand during the pricing for the series 2009B bonds, receiving over $200 million in retail orders," said a statement from the MTA Thursday.

"MTA also experienced solid investor institutional demand for both the series 2009B and series 2009C bonds. As a result of the strong investor demand, the par was increased to $500 million from $400 million for the series 2009B bonds and to $750 million from $200 million for the series 2009C bonds."

Old Dominion's new issues

In other primary activity, the Virginia Public School Authority priced $200.435 million in series 2009B school financing bonds at a TIC of 3.688395% (Aa1/AA+/AA+), according to Evelyn Whitley, director of debt management.

The yields were "a little better than we expected," Whitley said. "We were very pleased."

Wachovia Securities Inc. acted as underwriter for the negotiated sale. Merrill Lynch & Co. Inc. acted as co-manager.

The bonds carry serial maturities from 2010 to 2029.

Proceeds will be used to purchase series 2009 local school bonds.

Also in Virginia, the city of Newport News, priced $77.05 million in two tranches Tuesday and Wednesday, according to Jimmy Bae, a Public Financial Management Inc. consultant. Public Financial Management acted as adviser for the deal.

Bae was pleased with the results, especially as "rates have moved so much in the last two weeks," he said.

The $30 million series 2009A general obligation general improvement bonds (Aa2), which priced Tuesday, fetched a TIC of 3.44% from BMO Capital Markets Corp. Ten firms participated in the competitive auction.

The bonds due 2020 to 2025 are callable at par on Sept. 1, 2019.

The $47.05 million series 2009B G.O. general improvement refunding bonds (Aa2) were upsized from $22.495 million and priced Wednesday. UBS Securities LLC won the auction among six other bids with a TIC of 2.22%.

The series A bonds carry maturities from 2011 to 2029, and the series B bonds mature from 2009 to 2019.

Proceeds will be used to refund series 1998 G.O. water refunding and series 1999A and 1999B water refunding bonds.

Tennessee bonds reoffered

Elsewhere, the State of Tennessee recently priced $427.197 million in series 2009 G.O. and G.O. refunding bonds, said Mary-Margaret Collier, the state's director of finance. The bonds priced Wednesday.

The offering included $318.112 million in series 2009A G.O. bonds and $109.085 million in series 2009B G.O. refunding bonds (Aa1/AA+/AA+).

The 2009A bonds are due 2010 to 2029 with coupons from 2% to 5% and 0.45% to 4.38%. The 2009B bonds are due 2009 to 2021 with coupons from 2% to 5% and yields from 0.55% to 3.39%.

Morgan Stanley & Co. Inc. was the lead manager.

Proceeds will be used to repay the state's commercial paper notes.

Secondary weakens

Moving to the secondary market, traders said the tone was unchanged to slightly weaker as stocks edged up.

"The long end might be off a bit, but we're pretty much unchanged near the short end of the yield curve," said one trader.

In specific trades, the recently priced Albuquerque Municipal School District's series 2009A school building bonds were moving. The 3.5% 2019s were seen at 3.18% after pricing last week at 3.29%. The 4% 2022s were trading at 3.65%. The bonds priced at 3.9%.

In other trading news, the Turnpike Authority of Kentucky's recently sold series 2009A economic revitalization projects were moving. The 4.375% 2023s were trading at 3.91% after pricing at 4.4%. The 3% 2016s were seen at 2.845%. The bonds priced at 3.03%.

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