Municipal yields firm again; Guam Power Authority brings $344.36 million of high-yield bonds

By Sheri Kasprzak

New York, Oct. 4 - Muni yields improved yet again, and yields closed in on record lows, traders reported.

The market repeated its performance from Wednesday, with yields again falling by 1 basis point to 2 bps, said traders.

The new issues have been well-absorbed, said Guy LeBas, chief fixed income strategist with Janney Montgomery Scott LLC.

"The week's new-issue slate was absorbed quite easily, with the largest deal of the week, the $2.5 billion Pennsylvania unemployment compensation revenue deal, trading much better in the secondary market," LeBas said Thursday.

"As a concrete example about the strength of the Pennsylvania unemployment issue, the non-callable 5% coupon July 2019 maturity initially priced at 1.23% and traded as strong as 1.08%, according to MSRB data."

Deal had two tranches

The Pennsylvania Economic Development Finance Authority priced $2,527,405,000 of series 2012 unemployment compensation revenue bonds (Aaa/AA+/AA+) on Wednesday through Citigroup Global Markets Inc. and Bank of America Merrill Lynch.

The deal included $1,430,435,000 of series 2012A bonds and $1,096,970,000 of series 2012B bonds.

The 2012A bonds are due 2013 to 2019 with 1% to 5% coupons. The 2012B bonds are due 2020 to 2023 with 5% coupons.

Proceeds will be used to repay federal loans related to the commonwealth's unemployment compensation system.

Guam brings high-yield bonds

Headlining the day's subdued pricing action, the Guam Power Authority came to market with $344.36 million of series 2012A revenue bonds, a high-yield offering, said a market source.

The bonds (Baa3/BBB-/BBB-) were sold through Morgan Stanley & Co. LLC and Barclays.

The bonds are due 2013 to 2027 with term bonds due in 2030 and 2034. The serial coupons range from 2% to 5%. The 2030 bonds have a 5% coupon and priced at 109.345, and the 2034 bonds have a 5% coupon and priced at 105.203.

"It provided a high-yield credit to the marketplace," said one market source reached during the session.

"It definitely fills a niche. Obviously, it appeals to a certain investor base with risk appetite."

Proceeds will be used to refund the authority's series 1993 and 1999 revenue bonds.

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