Munis rally as secondary action heats up; New York's MTA brings $1.28 billion in upsized deal

By Sheri Kasprzak

New York, Sept. 20 - Municipal yields were improved on Thursday as the market continued to respond to improved secondary action and solid demand.

"Yields are firmer in spots. Trading is definitely stronger, there's more interest," one trader said.

"Dealers are moving out their inventory this week."

In fact, investor demand for municipals kept yields firmer in spite of a turnaround for Treasuries in the afternoon, said another trader.

"I think the new issues are making a big difference. The supply-demand dynamic is improved. For nearly a month, we had strong demand but little supply. That's evening out. Long-term supply outlook gives us some hope as well. That's driving the market at this point."

MTA brings $1.28 billion

Meanwhile, the week's largest deal hit the market Thursday. The Metropolitan Transportation Authority of New York brought $1,275,605,000 of series 2012F transportation revenue refunding bonds through Morgan Stanley & Co. LLC, Duncan-Williams Inc. and Ramirez & Co. Inc.

"In anticipation of strong demand, Metropolitan Transportation Authority, N.Y., bumped up its deal size by 27% to $1.27 billion as it priced a retail order period with the longest maturity in 2030 at 4% to yield 3.44%," Alan Schankel, managing director with Janney Montgomery Scott LLC, said in a report released Thursday.

"MTA then followed up with institutional pricing in the afternoon with a downward yield adjustment of as much as 5 bps in many maturities."

Coupons from 2% to 5%

The bonds (A2/A/A) are due 2012 to 2027 with a term bond due in 2030. The serial coupons range from 2% to 5%. The 2030 bonds have a split maturity with a 4% coupon priced at 104.752 and a 5% coupon priced at 114.999.

Proceeds will be used to refund existing MTA revenue bonds.

In mid-July, the MTA sold $500 million of transportation revenue bonds.

The bonds are due in 2027 and 2029. The 2027 bonds have a 5% coupon and priced at 111.745, and the 2029 bonds have a 5% coupon and priced at 112.257.

The authority planned to use the proceeds from the July offering to finance commuter and transit projects.

Broward sells airport bonds

In other large deals, Broward County, Fla., priced $619,476,000 of series 2012Q airport system revenue bonds, said a pricing sheet.

The bonds (/A+/A) were sold through Citigroup Global Markets Inc.

The deal included $515.62 million of series 2012Q-1 non-AMT bonds and $103,856,000 of series 2012Q-2 AMT bonds.

The 2012Q-1 bonds are due 2013 to 2033 with term bonds due in 2037 and 2042. The serial coupons range from 3% to 5%. The 2037 bonds have a 5% coupon and priced at 110.616. The 2042 bonds have a split maturity with a 4% coupon priced at 98.282 and a 5% coupon priced at 110.089.

The 2012Q-2 bonds are due 2014 to 2032 with term bonds due in 2037 and 2042. All of the bonds have 5% coupons. The 2037 bonds priced at 107.498, and the 2042 bonds priced at 106.735.

Proceeds will be used to expand runways at the Broward County Aviation Department.

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