Municipals drift lower as secondary takes back seat to primary; Broward brings airport bonds

By Sheri Kasprzak

New York, Oct. 8 - Municipals ended the session a touch weaker as secondary activity remained light and several primary deals hit the market, insiders said.

While action in secondary was comparatively light, bids-wanted were high, said a trader.

"A great deal of the week's new issue activity is occurring today," a trader said.

Municipals seen stabilizing

Although it has been a tough few months for the municipals market, RBC Wealth Management released a report Tuesday stating that the market appears to be stabilizing.

Many lower-coupon issues have been trading at discounts, opening up bond swaps as a popular strategy, said the report.

"Municipal bond investors have had their patience tested in recent months given a market that has felt like a never-ending uphill climb," said the report from Joseph Kay, senior vice president and financial adviser with RBC.

"The market has been pounded by a variety of factors - credit headline events, significant selling pressure from mutual funds and concerns over the Fed beginning to reduce monetary stimulus. These issues are still present. The Fed will begin to taper at some point. Mutual funds are still reporting outflows. Puerto Rico, Detroit and others are still in the headlines.

"Nonetheless, selling pressure has finally started to ease and renewed buyer interest has contributed to a more positive market tone. As a result, for the first time in a few months, positive monthly performance numbers were reported, particularly in high-grade general obligation bonds.

"We continue to feel that market conditions will remain choppy and investors should not become complacent. They should, however, continue to take advantage of selective opportunities and employ sound portfolio strategies where appropriate."

Broward sells airport bonds

Leading the day's active primary session, Broward County, Fla., brought $434,242,000 of series 2013 airport system revenue bonds in three tranches.

The deal included $164,515,000 of series 2013A AMT bonds, $55.4 million of series 2013B non-AMT bonds and $214,327,000 of series 2013C non-AMT bonds.

The bonds (A1/A+/A) were sold through senior managers J.P. Morgan Securities LLC and Raymond James/Morgan Keegan.

The 2013A bonds are due 2014 to 2033 with term bonds due in 2038 and 2043. The serial coupons range from 1.25% to 5.25%. The 2038 bonds have a 5.125% to yield 97.996, and the 2043 bonds have a 5.25% coupon priced at 98.365.

The 2013B bonds are due 2014 to 2033 with term bonds due in 2038 and 2043. The serial coupons range from 2% to 5.5%. The 2038 bonds have a 5.25% coupon and priced at 101.779, and the 2043 bonds have a 5% coupon and priced at 97.719.

The 2013C bonds are due 2014 to 2033 with term bonds due in 2038 and 2043. The serial coupons range from 1.25% to 5.5%. The 2038 bonds have a 5.25% coupon and priced at 101.779. The 2043 bonds have a 5.125% coupon priced at 99.617 and a 5.25% coupon priced at 101.076.

Proceeds will be used to finance terminal improvements and the expansion of the airport's south runway.

Texas brings student loan bonds

Amid the day's competitive offerings, the State of Texas priced $113,465,000 of series 2013B college student loan general obligation bonds.

The bonds (Aaa/AAA/) were sold competitively with BofA Merrill Lynch winning the bid at a 3.35091% true interest cost, said Patrick Krishock, senior financial analyst for the Texas Higher Education Coordinating Board.

The bonds are due 2019 to 2030 with 4% to 5.5% coupons and 1.85% to 4.18% yields.

Proceeds will be used to make low-interest loans to eligible undergraduate college students within the state.

The state most recently came to market in late May with $98.55 million of college student loan refunding bonds sold competitively at a 1.166544% TIC. Those bonds are due 2014 to 2023 with 2% to 5% coupons and 0.30% to 2.20% yields.

The bonds issued in May were sold before Standard & Poor's lifted the state's college student loan debt rating to AAA from AA+.

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