Munis close softer in spots; California brings $1.35 billion of G.O. bonds; retail takes 30.9%

By Sheri Kasprzak

New York, April 12 - Municipals were a touch off on Thursday as bids dried up, market insiders reported. Yields were off by about 1 to 3 basis points, according to traders reached during the session.

"We're not really seeing a lot moving in secondary," one trader said.

"The lack of bids seems to be impacting us a bit, especially in that 10- to 15-year range. We're off by about 1 to 3 [bps]."

Another market source pointed out that the largest sale of the week - a $1.35 billion sale from the State of California - was taking up most of the market's attention during the day, making secondary an afterthought.

"It's California, and there has been a dearth of California bonds out there over the past year, so that seems to be drawing in a lot of attention," he said.

The offering, he said, seemed to price pretty much in line with its retail pricing.

California brings G.O. bonds

The state finalized the pricing details Thursday afternoon after a two-day retail order period, said Tom Dresslar, spokesman for the state treasurer's office.

"The deal includes $890 million of new money for infrastructure projects and $464 million of refunded bonds," Dresslar said.

"The refunded bonds produce the borrowing-cost savings for taxpayers because the new interest rates on those bonds are lower."

Retail gobbled up about $418.94 million, or 30.9%, of the bonds, said Dresslar.

0.68% to 4.47% yields

The new money bonds are due 2014 to 2020 with term bonds due in 2035, 2037 and 2042. The serial coupons range from 2% to 5%. The 2035 bonds have a split maturity with a 4.25% coupon priced at 98.841 to yield 4.33% and a 5.25% coupon priced at 108.964 to yield 4.14%. The 2037 bonds have a 4.25% coupon and priced at 97.444 to yield 4.42%. The 2042 bonds have a split maturity with a 4.375% coupon priced at 98.437 to yield 4.47% and a 5% coupon priced at 104.866 to yield 4.39%.

The G.O. refunding bonds are due 2014 to 2024 with coupons from 2% to 5% and yields from 0.68% to 3.20%.

During the retail order period, the yield for the two-year bonds came in at 0.68% and the yield for the five-year bonds came in at 1.54%. At final pricing, the yield for the two-year bonds was also 0.68%, but the yield on the five-year bonds was finalized at 1.57%. The 10-year bonds were priced to yield 2.82% during the retail order period, but at final pricing, the yield came in at 2.87%. Thirty-year yields for retail investors came in at 4.45%, but at final pricing, yields were 4.47%.

The bonds (A1/A-/A-) were sold through lead managers Citigroup Global Markets Inc., Bank of America Merrill Lynch and Morgan Stanley & Co. LLC.

Proceeds will be used to fund construction projects and to current and advance refund some of the state's outstanding G.O. bonds for debt service savings.

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