Munis close firmer; University of Maryland sells $70.83 million of revenue refunding bonds

By Sheri Kasprzak

New York, Jan. 19 - Municipals rounded out another session on a firmer note, as the new issue supply continues to be absorbed quickly by eager investors, said a trader reached during the session Thursday.

The intermediate portion of the curve was the most improved, with 20-year yields down almost 7 basis points and 15-year yields down by almost 6 bps. Thirty-year yields were down by almost 2 bps.

Demand continues to drive the market, said the trader, noting that the supply is getting absorbed rather quickly.

Meanwhile, municipals will likely face continued challenges in 2012, said Remo di Re, vice president and senior municipal bond credit analyst with RBC Wealth Management.

"At year-end, continued demand for municipal bonds pushed yields to all-time lows, resulting in municipals leading the way as the best-performing fixed-income sector," di Re wrote in a report released Thursday.

"In our opinion, however, the municipal market will face continued challenges throughout most of 2012. Even though the majority of states have experienced a rebound in revenues, budget challenges remain due to the likelihood of continued reductions in federal support, state budgetary pressures and other economic factors."

Port Authority's lowest TIC

Wednesday's $400 million bond sale from the Port Authority of New York and New Jersey brought in the authority's lowest-ever true interest cost for consolidated bonds, said Steve Coleman, a spokesman for the authority.

Coleman said Thursday that the TIC - 3.857499% for the series 171 consolidated bonds - was "the lowest we have received in 46 years of issuing consolidated bonds."

The bonds were priced competitively with J.P. Morgan Securities LLC winning the bid, as previously reported by Prospect News.

The bonds are due 2030 to 2039 with a term bond due in 2042. The serial coupons range from 4% to 5%. The 2042 bonds have a 4% coupon priced at 103.557.

"The market reception for the sale continues to reflect investor confidence in the Port Authority's financial strength," said Coleman.

Proceeds will be used to fund capital projects for the authority.

University of Maryland prices

Heading up Thursday's primary action, the University of Maryland System came to market with $70,825,000 of series 2012 auxiliary facility and tuition revenue refunding bonds, said a pricing sheet.

The deal included $46.95 million of series 2012A tax-exempt bonds and $23,875,000 of series 2012B taxable refunding bonds.

The 2012A bonds are due 2013 to 2023 with 2% to 4% coupons. The 2012B bonds are due 2013 to 2024 with 2% to 3.25% coupons.

The bonds were sold competitively. Morgan Stanley & Co. LLC won the bid for the 2012A bonds and Robert W. Baird & Co. Inc. won the bid for the 2012B bonds, said Weems McFadden, the university system's executive accountant in an interview Thursday.

"The aggregate true interest cost for today's $70 million refunding was 1.814%," said McFadden.

"We had a lot of interest with 13 bidders for the tax-exempt and 10 bidders for the taxable bonds that were refunded. We are not generally required, but we choose to sell competitively."

Proceeds will be used to refund the university's series 2002A, 2003B, 2004B and 2005A revenue bonds.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.