Pennsylvania brings $300 million G.O.s with 5.06% TIC; secondary met with indifference, traders say

By Sheri Kasprzak

New York, Dec. 9 - Tuesday was another active day for new issues in the pipeline, but the glut of upcoming sales has some market insiders concerned. Meanwhile, the secondary market has been met with downright indifference, according to traders reached Tuesday afternoon.

A slew of long-awaited offerings dominated headlines Tuesday, led by the Commonwealth of Pennsylvania's reduced, $300 million sale of series 2008 general obligation bonds.

The commonwealth priced the G.O.s with a 5.058% true interest cost with J.P. Morgan Securities Inc. winning the competitive bid. Five bids were received for the offering, said Rick Dreher, director of the commonwealth's Bureau of Revenue, Capital & Debt.

The coupons and yields for the sale were not immediately available. The bonds are due 2010 to 2029.

Proceeds will be used for capital facilities projects and green facilities projects.

Even though the issuers are there, some sellsiders questioned whether the investors would be.

"It's a tough market right now," noted one sellside source based out of New York.

"It's the end of the year and retail is really where the heart of the market is. Retail is out Christmas shopping right now and the last thing they're concerning themselves with is the municipals market. We've got this overload of offerings coming up, because every single issuer out there wants to sell before the end of the year, and no investors to buy."

Another sellsider agreed.

"I'm going to take a guess and say a lot of what is out there now is going to get pushed back to 2009," he said.

"There's simply too much stuff and not enough interest."

One issuer - the City of Chicago - did take a planned sale off the table Tuesday. The city is now hoping to sell its $590.94 million in G.O. bonds in early 2009, according to Lisa Schrader, spokeswoman for the city's Office of Budget and Management. The sale had been scheduled for Wednesday.

"While we were confident we could successfully sell our high-rated bonds in December, there was no particular urgency to do so," Schrader said in an interview.

"We're hoping for a more favorable bond market in early 2009."

The secondary market isn't looking much rosier, a trader told Prospect News Tuesday.

"It's dead," he said.

"I think the economy has just gotten to the point where people are putting their money elsewhere. There's not a lot of demand [for secondary municipals] right now, to be frank with you."

Miami-Dade cuts sale size

The lack of investor interest in municipals may have forced Miami-Dade County in Florida to cut its $350 million competitive sale of series 2008B Building Better Communities Program G.O. bonds to $172 million on Tuesday.

Rachel Baum, the county's finance director, told Prospect News late last week that the county was in talks to reduce the offering size in light of the Port Authority of New York and New Jersey's failed competitive sale of $300 million in consolidated notes.

The bonds (Aa3/AA-/), which are due 2009 to 2028, will still price Thursday with Public Financial Management as the financial adviser.

Proceeds will be used for capital improvement projects under the Building Better Communities program.

Nassau plans BANs sale

Moving to upcoming offerings, Nassau County in New York announced plans to price $125 million in series 2008 bond anticipation notes, said a preliminary official statement released Tuesday.

The notes, which are due Oct. 15, 2009, will be sold on a negotiated basis with Merrill Lynch & Co. as the lead manager.

Proceeds will be used for general county expenses ahead of a bond sale planned for 2009.

Secondary market 'dead'

Looking to the secondary market, a trader Tuesday said activity was very light and municipals were off 2 to 3 basis points overall.

Moving to Tuesday's trading action, one trader said she saw great interest in the Dormitory Authority of the State of New York's New York University revenue bonds. The 5% 2038s were seen trading at 6.423%.

Dasny's Memorial-Sloan Kettering Cancer Center bonds were also being traded Tuesday with the 5% 2036s trading at 6.298%.

Meanwhile, the recently priced Commonwealth of Massachusetts's series 2008A G.O. bonds were also trading. The 5% 2025s were trading at 4.972%.

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