Munis soften along with Treasuries; new deals seen strong; Chicago Board of Education prices

By Sheri Kasprzak

New York, Aug. 14 - Municipals were slightly weaker on Tuesday, softening along with Treasuries amid a Treasuries sell-off, traders reported.

"We're off by 1 to 2 basis points," one trader said.

"Treasuries are selling off, and they're posting some losses as well, but we're still outperforming Treasuries."

Meanwhile, new issues were strong, including the recently downgraded Chicago Board of Education's $468.91 million sale of general obligation bonds.

Chicago BOE bonds sell

The board sold series 2012A G.O. bonds (A1/A+/A+) through Goldman Sachs & Co. and Loop Capital Markets LLC.

The bonds are due Dec. 1, 2042, have a 5% coupon and priced at 108.529.

"We did see pricing bumped on the Chicago BOE deal in the afternoon," one trader said.

"Clearly, primary's not that affected by what's going on in the rest of the market."

Proceeds will be used to fund the board's capital improvement program.

San Francisco USD prices TRANs

Also during the session, the San Francisco Unified School District of California brought to market $85 million of series 2012A tax and revenue anticipation notes, said a pricing sheet.

The notes were sold competitively. The issuer did not return calls for the winning bidder by press time.

The notes are due June 28, 2013, have a 2% coupon and priced at 101.51.

"California's financial strains are impacting even the strongest school districts, evidenced by S&P's assignment of a negative outlook to San Francisco Unified School District's AA- rating," wrote Alan Schankel, managing director with Janney Montgomery Scott LLC.

"Although buffeted by an adverse state funding environment in recent years, SFUSD has had voter support for increased revenue and reduced expenditures in FY11 and FY12, but facing a sizeable deficit in FY13, the district is closing its budget gap by using one-time fixes and tapping reserves which are projected to fall from 8% of expenditures to 3% in the coming fiscal year. None of this calculus considers the potential impact of further cuts in state aid which will be triggered if voters fail to pass statewide tax increases in November."

Proceeds will be used to provide funds to address periodic cash flow deficits in the general fund.

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