Munis end steady to slightly firmer on strong primary response; Louisiana significantly upsizes

By Sheri Kasprzak

New York, May 3 - Yields, particularly outside of 10 years, were seen slightly firmer, while the remainder of the market held steady, traders reported on Thursday afternoon. Good investor response was credited for most of the firmness seen in the market, sources said.

"The supply has been good this week, and demand is still decent, so absorption has been steady," said one trader reached in the afternoon.

"There's a good amount of retail interest in the market overall, and around 10, 11 years or so, yields are firming by 1 to 3 basis points. Everything else is flat for the most part."

Good reception to the largest deal of the week, the State of Illinois' $1.79 billion sale of general obligation bonds, was evident in trading activity, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"Underlying municipal market strength was demonstrated by strong after-sale trading of bonds from the week's largest loan, $1.8 billion [from] Illinois," he wrote Thursday.

The longest maturity, the 5% bonds due 2025, "priced Tuesday at a 4% yield as a new issue [and] saw blocks trading at yields as low as 3.86% at day's end yesterday."

The bonds (A2/A+/A) were sold through lead managers Jefferies & Co., BMO Capital Markets LLC, Duncan-Williams Inc. and Rice Financial Products Co.

The bonds are due 2013 to 2025 with 1.6% to 5% coupons.

Proceeds will be used to refund existing G.O. debt.

Louisiana upsizes

Elsewhere in primary action, the State of Louisiana priced $803.08 million of series 2012-1 gasoline and fuels tax revenue refunding bonds (Aa1//AA-).

The bonds were priced through lead manager Citigroup Global Markets Inc.

"Demand was strong enough for the Louisiana gas and fuel tax issue that it was upsized from $515 million to $800 million, while yields were adjusted lower," Schankel said.

The bonds are due 2013 to 2035 with 2.5% to 5% coupons.

Proceeds will be used to current refund the state's series 2002A revenue bonds and advance refund its series 2005A and 2006A revenue bonds.

Seattle discloses TICs

In other pricing action, the City of Seattle's $126.54 million sale of series 2012 G.O. bonds brought in 2.659% and 1.269% true interest costs, said Michael Van Dyck, director of debt for the city.

The deal included $76.67 million of series 2012 limited tax G.O. improvement and refunding bonds and $49.87 million of series 2012 unlimited tax G.O. refunding bonds.

The bonds were sold competitively. J.P. Morgan Securities LLC won the bid for the limited tax G.O. improvement and refunding bonds at a 2.659% TIC, and Morgan Stanley & Co. LLC won the bid for the unlimited tax G.O. refunding bonds at a 1.269% TIC.

The limited tax G.O. improvement and refunding bonds (Aa1/AAA/AA+) are due 2012 to 2032 with 2% to 5% coupons. The unlimited tax G.O. refunding bonds (Aaa/AAA/AAA) are due 2012 to 2021 with 3% to 5% coupons.

"These were plain vanilla issues that sold best competitively," Van Dyck said Thursday.

Proceeds will be used to fund certain capital projects and refund existing G.O. debt.

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