Yields end week firmer on news of possible BABs resurrection, lull in supply; MTA preps deal

By Sheri Kasprzak

New York, Dec. 17 - Municipal yields once again firmed. Long bonds were seen lower by as much as 12 basis points, market insiders reported.

"We might have seen the worst of it," said one trader reached Friday afternoon.

"Supply is lighter, so that's helping take some of the pressure off of yields. It happened pretty suddenly, but new issues have tapered off dramatically, and upcoming supply is a lot lower."

Another driving factor for Friday's rally could be word that Rep. John Mica, R-Fla., plans to introduce a new form of the Build America Bond program once he becomes the chairman of the House Transportation and Infrastructure Committee in January.

The full scope of Mica's proposed incarnation of the Build America Bonds program was not immediately clear Friday, but some market insiders said any hope for the program's extension is welcome news for the market.

"It's been a good program, and if it continues, that would certainly be beneficial," said one sellside source reached Friday.

"It really has brought investors into the market that might not otherwise have invested in municipals."

BABs help McCracken schools

One issuer noted Friday that its recent issue of Build America Bonds will save county taxpayers more than $6 million over the life of the bonds.

Molly Goodman, spokeswoman for the McCracken County School District Finance Corp. of Kentucky, said the district sold $57.27 million of school building Build America Bonds on Thursday with a 3.709% net interest cost.

"It is estimated that the average interest rate if tax-exempt bonds were issued would have been about 4.45%," she said.

"The interest cost savings to the district by issuing BABs is estimated at over $6 million over the life of the bond issue, a substantial savings over tax-exempt bonds to the district and the citizens of McCracken County."

The bonds (Aa2) were sold competitively with Robert W. Baird & Co. winning the bid.

The bonds are due 2011 to 2026 with term bonds due 2028 and 2030. The serial coupons range from 0.95% to 5.75%. The 2028 bonds have a 6% coupon priced at par, and the 2030 bonds have a 6.125% coupon priced at par.

Proceeds will be used to finance a new McCracken County High School.

The district is located in Paducah, Ky.

MTA to drive deal

Looking to the much-leaner primary market for the week ahead, the Metropolitan Transportation Authority of New York is slated to price $350 million of series 2010E transportation revenue bonds on Wednesday, said a preliminary official statement.

The bonds will be sold on a negotiated basis with Barclays Capital Inc. and Wells Fargo Securities LLC as the senior managers.

The bonds are due Nov. 15, 2030 and Nov. 15, 2040.

Proceeds will be used to finance commuter and transit projects in New York.

Based in New York, the authority operates the city's transit system, including its subways, buses, bridges and tunnels.

Palm Beach Solid Waste sells

In pricing news, the Solid Waste Authority of Palm Beach County in Florida sold $750 million of series 2010 improvement revenue bonds on Thursday, said a term sheet.

The bonds were sold through Citigroup Global Markets Inc. and are due Oct. 1, 2031. The 1% bonds were priced at 111.518.

Proceeds will be used to construct, equip, procure and install a waste-to-energy facility.

The authority is based in West Palm Beach, Fla.

Manatee County prices bonds

Elsewhere on Friday, Manatee County, Fla., sold $78.02 million of series 2010 public utilities revenue bonds, said a term sheet.

The deal included $17.81 million of series 2010A Build America Bonds, $45.3 million of series 2010B recovery zone economic development bonds, $6.72 million of series 2010C refunding and improvement bonds and $8.19 million of series 2010D taxable improvement bonds.

The 2010A bonds are due 2020 to 2025 with 5.951% to 6.801% coupons, all priced at par. The 2010B bonds are due 2030 and 2035 with 7.178% and 7.378% coupons, respectively, both priced at par. The 2010C bonds are due 2017 to 2019 with coupons from 3.5% to 5%. The 2010D bonds are due 2014 to 2017 with 3.394% to 5.048% coupons.

Citigroup was the senior manager.

Proceeds will be used to finance additions, replacements and upgrades to the county's water and wastewater system and to refund existing debt.

The county seat is Bradenton.

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