Municipals firm; week's new deals expected to total $8 billion; Knoxville brings $50 million

By Sheri Kasprzak

New York, Sept. 9 - Municipal yields were improved somewhat, particularly high-grade munis in the middle of the curve, as Treasury yields also fell, market insiders said.

This week will provide about $8 billion of new offerings, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

Issuance will be led by competitive deals, the largest of which will be a $758,335,000 offering from the New York State Urban Development Corp. The corporation will hit the market Tuesday with series 2013C state personal income tax revenue bonds, which are due 2015 to 2033.

Proceeds from the sale will reimburse the state for the costs of a multiyear highway and bridge capital program; to make grants to reimburse municipalities and other project sponsors throughout the state for qualifying capital expenditures for highway, bridge and multimodal projects; and to fund other transportation projects.

Tuesday will also feature a $495 million offering out of Arkansas. The state will hit the market on with series 2013 general obligation four-lane highway construction and improvement bonds.

The bonds (Aa1/AA/), which are due 2014 to 2023, will finance the construction and improvement of a variety of highways as part of the Connecting Arkansas Program.

Long-term issuance down

Kozlik reported Monday that long-term municipal issuance fell by 38% in August compared to August 2012.

The drop occurred largely because of a decrease in refundings, he said.

"Refundings are just not as attractive as they have been since the jolt up in yields that occurred from the beginning of May to the end of June," Kozlik said.

"Refunding volume fell 77% in August to $3 billion from $15 billion in August of the prior year. Municipal issuers sold only $21 billion in August 2013, compared to the same month last year when they sold $34 billion of bonds. In the largest sectors, the market saw issuance drop 53% for utilities, 52% in the transportation sector, 36% for education credits and 32% for general purpose entities."

Knoxville sells debt

Heading up Monday's light primary action, the City of Knoxville, Tenn., sold $50 million of series 2013 gas and water system revenue bonds, said a pricing sheet.

The deal included $25 million of series T-2013 gas system revenue bonds (Aa2/AA/) and $25 million of series Z-2013 water system revenue bonds (Aa2/AA+/).

The gas bonds are due 2014 to 2033 with a term bond due in 2035. The serial coupons range from 2% to 4.5% with 0.25% to 4.54% yields. The 2035 bonds have a 4.6% coupon and priced at par.

The water bonds are due 2014 to 2038 with a term bond due in 2044. The serial coupons range from 2% to 4.625% with yields from 0.22% to 4.77%. The 2044 bonds have a 5% coupon and priced at 101.731 to yield 4.72%.

The bonds were sold competitively, but the issuer did not return calls for the winning bidder Monday.

Proceeds will be used to finance the improvement and extension of the city's gas and water systems.

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