Munis weaken as supply continues to pressure yields; Rutgers sells $500 million of G.O. bonds

By Sheri Kasprzak

New York, Nov. 3 - Municipal yields were again higher following election results and a robust supply of new deals.

According to a trader, the secondary market remained quiet as investors watched election results and the Federal Reserve's announcement on quantitative easing measures. The Fed plans to purchase $600 billion of long-term securities.

"There's a lot going on all over the place, so investors are hanging back," said the trader.

"Everyone's waiting to hear from the Fed, there's loads going on in primary, and it's probably a good day to wait and see what's happening. Yields on long bonds are up by maybe a couple of basis points."

Meanwhile, Alan Schankel, managing director with Janney Montgomery Scott LLC, said preliminary pricing on Los Angeles County Metropolitan Transportation Authority's 29-year Build America Bonds, which are set to price on Thursday, were talked at 175 basis points over 30-year Treasuries.

The Northeast Ohio Regional Sewer District's series 2010 wastewater improvement bonds set to price Thursday through Barclays Capital Inc. were talked Wednesday at 200 bps over comparable Treasuries.

Rutgers brings bonds

In Wednesday's pricing action, Rutgers, the State University of New Jersey brought to market $500.035 million of series 2010 general obligation bonds, said a term sheet.

The sale included $391.4 million of series 2010H Build America Bonds and $108.635 million of series 2010I tax-exempt bonds. The offering was downsized from $508.435 million after an $8.4 million tranche of series 2010J taxable bonds was removed.

The bonds (Aa2/AA/) were sold through Morgan Stanley & Co. Inc. and Bank of America Merrill Lynch.

The 2010H bonds are due 2019 to 2022 with term bonds due 2029 and 2040. The serial coupons range from 3.776% to 4.376%, all priced at par. The 2029 bonds have a 5.545% coupon priced at par, and the 2040 bonds have a 5.665% coupon, also priced at par.

The 2010I bonds are due 2013 to 2025 with term bonds due in 2029. The serial coupons range from 2% to 5%. The 2029 bonds have a split maturity with a 4% coupon and a 5% coupon.

Proceeds will be used to construct and equip improvements at the university's campuses in New Brunswick, N.J., Camden, N.J., and Newark.

Love Field flies deal

Also during the day, the Love Field Airport Modernization Corp. of Texas priced $310 million of series 2010 special facilities revenue bonds, said a pricing sheet.

The bonds (Baa3/BBB/) were sold through Goldman, Sachs & Co.

The bonds are due Nov. 1, 2040 and have a 5.25% coupon priced at 98.146.

Proceeds will be used to construct and implement improvements to terminal, concourse and ancillary facilities at Love Field Airport in Dallas for Southwest Airlines Co.

Massachusetts housing bonds price

Up north, the Massachusetts Housing Finance Agency sold $212.18 million of series 2010 housing bonds in three tranches Wednesday, said a pricing sheet.

The bonds were sold through Barclays Capital Inc. and Bank of America Merrill Lynch.

The sale included $130.99 million of series 2010C AMT bonds, $67.825 million of series 2010D taxable bonds and $13.365 million of series 2010E non-AMT bonds.

The 2010C bonds are due 2011 to 2020 with term bonds due 2025, 2030 and 2042. Serial coupons range from 1.6% to 4.5%. The 2025 bonds have a 4.9% coupon, and the 2030 bonds have a 5% coupon. The 2042 bonds have a 5.35% coupon.

The 2010D bonds are due 2020, 2030 and 2042. The 2020 bonds have a 4.782% coupon, and the 2030 bonds have a 6.868% coupon. The 2042 bonds have a 7.018% coupon.

The 2010E bonds are due 2011 to 2014 with term bonds due 2020, 2030, 2040 and 2053. The serial coupons range from 0.75% to 1.65%. The 2020 bonds have a 3.45% coupon, and the 2030 bonds have a 4.5% coupon. The 2040 bonds have a 4.875% coupon, and the 2053 bonds have a 5.125% coupon.

All of the bonds priced at par.

The agency plans to use the proceeds to refund its series 2000A-B and 2001A-E rental housing mortgage revenue bonds.

Piedmont powers sale

Elsewhere, the Piedmont Municipal Power Agency of South Carolina sold $124.67 million of series 2010A electric revenue bonds in five tranches, said a pricing sheet.

The deal included $14.865 million of series 2010A-1 taxable bonds, $52.59 million of series 2010A-2 refunding bonds, $18.56 million of series 2010A-3 refunding bonds, $23.325 million of series 2010A-4 refunding bonds and $15.33 million of series 2010A-5 refunding bonds.

The 2010A-1 bonds are due 2017 and have a 4.344% coupon priced at par. The 2010A-2 bonds are due 2017 to 2018 and 2021 to 2022. The bonds have 5% coupons. The 2010A-3 bonds are due 2023 to 2024 with 5% coupons. The 2010A-4 bonds are due 2024 to 2025 with 4% to 5% coupons. The 2010A-5 bonds are due 2021 to 2023 with 5% coupons.

The bonds were sold through Goldman Sachs and Wells Fargo Securities LLC.

Proceeds will be used to refund the agency's series 1986, 1991, 1991A and 1998 refunding bonds.

Spokane School District sells

In the competitive market Wednesday, the Spokane School District No. 81 of Washington brought $130.96 million of series 2010 G.O. bonds, said Trevor Carlson, debt director for the district.

The sale included $10.5 million of series 2010A tax-exempt G.O. bonds, $80.96 million of series 2010B tax-exempt G.O. refunding bonds and $39.5 million of series 2010C Build America Bonds.

The 2010A bonds are due Dec. 1, 2011 and have a 2% coupon.

The 2010B bonds are due 2011 to 2022 with coupons from 2% to 5%. Carlson said the district achieved a $5.171 million net present value savings from the refunding.

The 2010C bonds are due 2027 to 2029 with 5.35%, 5.45% and 5.5% coupons.

The full details of the offering were not immediately available, Carlson said, because the district would be finalizing the sale at a special board meeting Wednesday evening.

The bonds (Aa1/AA/) were priced competitively. Piper Jaffray & Co. won the 2010A bonds with a 0.397% true interest cost, and J.P. Morgan Securities LLC won the 2010B bonds with a 2.635% TIC. The 2010C bonds were won by Citigroup Global Markets Inc. with a 3.519% TIC.

"For a smaller issuer, like school districts and communities, sometimes it's easier to step back and get bids and say, 'This is the best bid we got,'" Carlson said of the district's decision to sell the bonds competitively.

"We have this discussion every time we sell bonds."

Proceeds will be used to construct and improve the district's school facilities.

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