Municipals drop modestly, trading picks up; retail buyers take a third of California deal

By Sheri Kasprzak

New York, March 13 - Municipals were modestly weaker on Wednesday with high-grade bonds trading slightly cheaper, traders said. Lower-grade bonds, however, were mostly flat.

"There is a weaker overall tone, but high-grade names are definitely off," said one trader.

"Long bonds are still weak point [of the curve]. Yields are off, 1 to 2, maybe even 3 bps in spots."

In other news, the market awaits the largest deal of the week, a $2.4 billion offering from the State of California.

"It was reported that retail orders were received for about a third of the issue on day one," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

California G.O.s ahead

Final pricing on the state's series 2013 G.O. bonds (A1/A/A-) will take place Thursday. J.P. Morgan Securities LLC and Goldman, Sachs & Co. are the senior managers for the offering.

The deal includes $1.09 billion of series 2013A various purpose G.O.s, $1 billion of series 2013 various purpose G.O. refunding bonds and $310 million of series 2013C taxable various purpose G.O. bonds.

The state intends to use the proceeds to fund capital projects.

Moody's says university debt pressured

In ratings news, the higher education sector is experiencing additional pressure, said Moody's Investors Service in a recent comment. According to the ratings agency, lower levels of parent and student savings for college are placing additional pressure on the already troubled sector.

"Based on Sallie Mae, the gap between tuition costs and parent savings is growing," said Schankel in a report Wednesday.

"From 2010 to 2013, average tuition costs rose 10.8%, while in the same period, average savings fell 45% from $21,600 to $11,800. This adds pressure on private college revenues, with an increasing percent of schools unable to grow tuition revenue at the rate of inflation due to declining pricing power."

New York Urban Development deal prices

Heading up Wednesday's new issues, the New York State Urban Development Corp. sold $843.83 million of series 2013 general purpose state income tax revenue bonds, said a pricing sheet.

The bonds (/AAA/AA+) were sold through Wells Fargo Securities LLC and RBC Capital Markets LLC.

The offering included $572.99 million of series 2013A-1 bonds, $70.07 million of series 2013A-2 bonds and $200.77 million of series 2013B taxable bonds.

The 2013A-1 bonds are due 2019 to 2034 with a term bond due in 2043. The serial coupons range from 4% to 5%. The 2043 bonds have a split maturity with a 4% coupon priced at 101.732 and a 5% coupon priced at 112.193.

The 2013A-2 bonds are due 2014 to 2026 with 2% to 5% coupons.

The 2013B bonds are due 2014 to 2019 with coupons from 0.22% to 1.75%.

Proceeds will be used to finance economic development projects.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.