Municipals cheapen as new deals saturate market; San Francisco Public Utilities bonds price

By Sheri Kasprzak

New York, May 22 - Municipals weakened 1 to 5 basis points as a deluge of new offerings came to market Tuesday, and the most weakness was seen in the 10- to 15-year range, said traders.

"There's a lot of supply pressure, and yields are getting hit because of it," one trader said.

"Around 10 or 15 years, yields are cheaper by about 4 or 5 bps. There's just so much coming down the pipeline this week, and a ton of larger deals are pricing today. Secondary is practically dead."

Leading the day's primary action, the San Francisco Public Utilities Commission brought $686.04 million of series 2012A-C water revenue bonds, said a pricing sheet.

Bonds sold in three tranches

The deal included $575.71 million of series 2012A bonds, $16.15 million of series 2012B bonds and $94.18 million of series 2012C bonds.

The 2012A bonds are due 2031 to 2037 with term bonds due in 2039, 2041 and 2043. The serial bonds all have 5% coupons. The 2039 bonds and the 2041 bonds have 4% coupons. The 2043 bonds have a 5% coupon.

The 2012B bonds are due 2031, 2033 and 2043 and have 4% coupons. The 2031 bonds priced at 104.15, the 2033 bonds priced at 102.715, and the 2043 bonds priced at 99.112.

The 2012C bonds are due 2025 to 2032 with coupons from 4% to 5%. The full details were not immediately available Tuesday.

The bonds (Aa3/AA-/) were sold competitively. Wells Fargo Securities LLC won the 2012A bonds with a 4.27% true interest cost. Citigroup Global Markets Inc. won the 2012B bonds with a 4.113% TIC and the 2012C bonds with a 3.736% TIC, according to Tyrone Jue, spokesman for the commission.

Proceeds will be used to acquire, construct and design improvements for the benefit of the utility's water enterprise.

"We have historically sold our debt competitively to achieve the best possible value for our ratepayers," Jue said in an interview Tuesday.

"The bonds sold today are funding the voter-approved and historic $4.6 billion seismic upgrade of the Hetch Hetchy Regional Water System. Our rate projects forecasted selling our water revenue bonds at 5%. With the favorable rates from this last bond sale, we're saving $130 million [of interest] over the next 31 years."

The commission expects to price $30 million of refunding bonds in July, said Jue.

Massachusetts sells G.O. bonds

Another major offering that came to market was a $350 million sale of series 2012B consolidated loan general obligation bonds from the Commonwealth of Massachusetts.

The bonds (//AA+) were sold competitively with Bank of America Merrill Lynch winning the bid.

The bonds are due 2023 to 2028 with a term bond due in 2042. The serial coupons range from 3% to 5%. The 2042 bonds have a 4% coupon and priced at 102.655.

Proceeds will be used to finance or reimburse the state for capital expenditures under the current capital financing program.

Wisconsin fetches 3.49% TIC

Meanwhile, the State of Wisconsin priced $188.58 million of series 2012A G.O. bonds, said a pricing sheet.

The bonds (//AA) were sold competitively with J.P. Morgan Securities LLC winning the bid with a 3.485064% TIC, said David Erdman, director of bond finance for the state Department of Administration.

The bonds are due 2022 and 2024 to 2035 with term bonds due in 2037 and 2042. The serial coupons range from 3% to 5%. The 2037 bonds have a 3.75% coupon and priced at par, and the 2042 bonds have a 4% coupon and priced at 100.869.

Proceeds will be used to finance capital improvement projects, including projects for the University of Wisconsin system.

"These G.O. bonds were issued for bricks-and-mortar, general government purposes," Erdman said.

"The state typically issues two or three G.O. issues per year for these purposes. The largest purpose in this bond issue is for projects at the University of Wisconsin system."

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