Yields hold steady as billions price; New York City Transitional Finance brings $1.14 billion

By Sheri Kasprzak

New York, May 18 - Municipal yields were largely unchanged on Tuesday as institutional investors flocked to the primary market, said market insiders.

"Yields out long might be 1 basis point lower, but for the most part, it's unchanged," said one trader.

But while institutional investors jumped on a new slate of offerings, retail buyers shrugged off the deals.

"Retail is really kind of hesitant right now," said a sellsider reached during the afternoon.

"Some deals have been downsized for that reason. I think some issuers are ready to price, but they also know that retail just isn't there. They're going to have to cut down a little for that reason."

Amid the heavy primary action Tuesday, New York City Transitional Finance Authority priced $1.14 billion in series 2010 future tax secured bonds, said a pricing sheet.

The full details were not immediately available.

The sale included $342 million in series 2010G-1 Build America Bonds, $78 million in series 2010G-2 Build America Bonds, $250 million in series 2010G-3 taxable qualified school construction bonds, $70 million in series 2010G-4 taxable subordinate bonds, $35 million in series 2010H tax-exempt subordinate bonds, $20 million in series 2010I-1 taxable subordinate bonds and $345 million in series 2010I-2 tax-exempt subordinate bonds.

The 2010G-1 bonds are due 2014 to 2020 with term bonds due 2030, 2031, 2032, 2036 and 2040. The coupons range from 2.662% to 5.747%, all priced at par.

The 2010G-3 bonds are due 2027 with a 5.267% coupon, priced at par.

The 2010G-4 bonds are due 2012 to 2013 and 2016 with coupons from 1% to 2.9%, all priced at par.

The 2010H bonds are due 2011 to 2021 with coupons from 2% to 3.5%. The full details of the H bonds were not available Tuesday afternoon.

The 2010I-1 bonds are due 2011 with a 2.5% coupon, priced at 102.66. The 2010I-2 bonds are due 2011 to 2027 with coupons from 2% to 5%. Yields were not immediately available for the I-2 bonds.

Bank of America Merrill Lynch was the senior manager.

Proceeds will be used to construct, renovate, rehabilitate and repair public school facilities as well as refund debt.

The authority provides funding for the city's capital program.

Massachusetts DOT sells

The Massachusetts Department of Transportation was forced to reduce the size of its $976.97 million sale of series 2010 metropolitan highway system revenue bonds (A3/A/A+), said a source close to the deal. The department had intended to sell $1.101 billion.

"Retail was really absent from this one, but I think the pricing was very fair," said the sellsider.

The deal included $46.405 million in series 2010A-1 variable-rate bonds, $49.965 million in series 2010A-2 variable-rate bonds and $880.6 million in series 2010B bonds.

The terms of the variable-rate bonds were not immediately available. The 2010B bonds are due 2011 to 2029 with term bonds due 2032 and 2037. Coupons range from 2% to 5% with yields from 0.86% to 4.81%.

Both variable-rate bonds are due 2037.

J.P. Morgan Securities Inc. was the lead manager for the 2010A bonds, and Citigroup Global Markets Inc. was the senior manager for the 2010B bonds.

Proceeds will be used to offset payments under a swap agreement entered into with UBS Financial Services Inc. as well as refund the department's series 1997 bonds.

Washington airport bonds price

Elsewhere, the Metropolitan Washington Airports Authority also cut back on an offering Tuesday. The authority sold $342.6 million in series 2010 Dulles Toll Road and Dulles Metrorail revenue bonds, said a pricing sheet and a source familiar with the deals. The authority had expected to price $400 million of the bonds last week.

The authority priced $192.6 million in Dulles Toll Road revenue bonds through Citigroup Global Markets Inc. The full pricing details for those bonds were not immediately available Tuesday.

Morgan Stanley & Co. Inc. sold $150 million in 8% Dulles Metrorail and capital improvement revenue bonds. Those bonds are due 2047 and were priced at par.

Proceeds from the sale will be used to fund road improvements and capital improvements for the Dulles Metrorail project at the Washington Dulles International Airport.

The D.C.-based authority operates the city's two major airports.

Rice University prices

The Houston Higher Education Finance Corp. sold $97.225 million in series 2010A higher education revenue bonds for Rice University, said a pricing sheet.

The bonds (Aaa/AAA/) were sold through JPMorgan and Ramirez & Co. Inc.

The bonds are due 2035 and 2040. Both term bonds have a 5% coupon, but the yields were not available Tuesday evening.

Proceeds from the sale will be used to construct a BioScience Research Collaborative, additional student housing and academic buildings at the university, which is based in Houston.

The corporation provides access to the capital markets for nonprofit and other organizations.

Pennsylvania plans $1 billion

Heading up Wednesday's offerings, the Commonwealth of Pennsylvania is set to price $1 billion in series 2010 general obligation bonds competitively.

The sale includes $451.1 million in series 2010A tax-exempt bonds and $548.9 million in series 2010B Build America Bonds

Proceeds will fund open-space initiatives, construct capital projects and renovate water supply and sewer systems.

Cornell to sell

Out on the horizon, the Dormitory Authority of the State of New York is expected to price $285 million in series 2010A revenue bonds for Cornell University, said a preliminary official statement. Pricing is expected during the week of May 24.

The bonds (Aa1/AA/) will be sold on a negotiated basis with Bank of America Merrill Lynch and Citigroup as the senior managers.

Proceeds from the offering will be used to refinance the university's commercial paper and finance the construction of a medical research building.

The Albany-based authority provides financing for educational and nonprofit capital projects. The university is based in Ithaca, N.Y.

Hawaii Pacific to price

Elsewhere, the Hawaii Pacific Health Obligated Group is set to price $100 million in series 2010A special purpose revenue bonds, said a preliminary official statement. The bonds are expected to price the week of May 24.

The bonds (A3/BBB+/) will be sold through Morgan Stanley.

Proceeds will be used to refund the obligated group's series 2005A and 2009A bonds.

The obligated group, which is based in Honolulu, operates the Kapi'olani Medical Center for Women and Children and its related organizations.

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