Mississippi sells $650.67 million; muni yields close flat to slightly weaker as demand softens

By Sheri Kasprzak

New York, Oct. 21 - New issue supply was still strong enough on Thursday to keep yields either unchanged or slightly higher, said a trader reached late in the day. Despite an increase in visible supply, demand seems to be dwindling, according to a few market sources.

"We are definitely seeing a lag in demand," reported the trader reached Thursday afternoon.

"There's plenty of supply, but there's very little interest out there, so that's shoving yields up in spots. We're flat for the most part, but out long, yields are up 1 to 2 bps. Some weakness is out there."

Alan Schankel, managing director at Janney Montgomery Scott LLC, reported Thursday that visible supply has risen to $14.6 billion.

"The market is also dealing with softening demand after inflows to muni mutual funds eased to $243 million for the week ended Oct. 13, the slowest weekly pace since mid-June," Schankel said.

Mississippi bonds price

Moving to Thursday's primary action, the State of Mississippi came to market with $650.67 million in series 2010 general obligation bonds, said a pricing sheet.

The sale included $233.975 million in series 2010D taxable bonds, $45 million in series 2010E recovery zone economic development bonds and $371.695 million in series 2010F Build America Bonds.

The 2010D bonds are due 2011 to 2023 with 0.651% to 4.351% coupons, all priced at par. The 2010E bonds are due 2035 and have a 5.445% coupon priced at par. The 2010F bonds are due 2023 to 2025 with a term bond due 2034. The serial coupons range from 4.35% to 4.68%, all priced at par. The 2034 bonds have a 5.245% coupon priced at par.

Bank of America Merrill Lynch and Morgan Stanley & Co. Inc. were the senior managers.

The state intends to use the proceeds to refinance the state's series 2009B G.O. notes and series 2010A-C G.O. notes and to fund loans, finance capital improvements, economic development projects and other capital projects.

UMass Building bonds price

In other news, the University of Massachusetts Building Authority priced Thursday $559.66 million in project revenue bonds, said a pricing sheet.

The bonds (Aa2//AA) were sold competitively, but calls to the issuer for the winning bidder were not returned.

The sale included $126.335 million in series 1 revenue bonds, $430.32 million in series 2 Build America Bonds and $3.005 million in series 3 taxable revenue bonds.

The series 1 bonds are due 2011 to 2020 with 2.5% to 5% coupons. The series 2 bonds are due 2021 to 2030 with a term bond due 2040. The serial coupons range from 3.8% to 5.15%, all priced at par, and the 2040 bonds have a 5.45% coupon priced at par. The series 3 bonds are due 2040 and have a 5.75% coupon priced at par.

Proceeds will be used to finance improvements to the university's Amherst, Boston, Dartmouth and Lowell campuses.

D.C. Water brings deal

Elsewhere, the District of Columbia Water and Sewer Authority priced Thursday $300 million in series 2010A public utility subordinated-lien revenue bonds, said a pricing sheet.

The bonds (Aa3/AA-/AA-) were sold through J.P. Morgan Securities LLC.

The bonds are due 2020 to 2023 with term bonds due 2028 and 2044. The serial coupons range from 4.068% to 4.568%, all priced at par. The 2028 bonds have a 5.422% coupon priced at par, and the 2044 bonds have a 5.522% coupon, also priced at par.

The authority will use the proceeds to refinance outstanding commercial paper notes.

Sonoma TRANs price

Also during the session, Sonoma County in California brought to market $135 million in series 2010-2011 tax and revenue anticipation notes, said a term sheet.

The 2% notes were won via competitive bid by Goldman, Sachs & Co. The true interest cost came in at 0.35465%. The notes (/SP-1+/) are due Oct. 27, 2011 and were priced at 101.69.

Back in October 2009, the county sold $120 million in 1.5% TRANs priced at 101.102.

Proceeds from the notes will be used to finance general capital requirements ahead of the collection of taxes and revenues in fiscal year 2011.

The county seat is Santa Rosa, Calif.

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