Intermediate to long bonds seen better by 5 to 6 bps; Dasny announces $332.88 million sale

By Sheri Kasprzak

New York, May 5 - Municipals were yet again stronger on Thursday even as supply continued to dwindle, market insiders reported.

"Short bonds are pretty much as low as they can go," said one trader reached during the session.

"Middle and long maturities are down 5 to 6 [bps]."

Despite the free fall in yields over the past couple of weeks, the trader noted that there is a bit more supply expected in the week ahead. Virginia's Commonwealth Transportation Board will sell $600 million of series 2011 transportation capital project revenue bonds (//AA+), and a few other larger deals will come to market.

"That's the question. What's going to happen when things pick up? And I think we're all waiting for yields to move back up," he said.

The Virginia offering will price competitively on Wednesday.

NJ Transportation repriced

In repricing action, Alan Schankel, managing director with Janney Montgomery Scott LLC, said the New Jersey Transportation Trust Fund's 30-year bonds, part of its $600 million sale of series 2011A transportation system bonds from Tuesday, were finalized at 5.47% after initially pricing to yield 5.65%.

The bonds are secured by annual state appropriations, according to Schankel. The bonds were slated to price on Wednesday but were bumped ahead a day because of low overall supply.

The bonds (A1/A+/AA-) were sold through J.P. Morgan Securities LLC.

The bonds are due 2013 to 2031 with term bonds due in 2035 and 2041. The serial coupons range from 3% to 5.25%. The 2035 bonds have a 6% coupon. The 2041 bonds have a 5.5% coupon.

Also on Thursday, Schankel said the series 2011A revenue bonds that Pennsylvania Higher Educational Facilities Authority sold on Wednesday for Drexel University were seen cheaper on Thursday in the shorter maturities but bumped on the long end to 5.38% from 5.45%.

The bonds are due 2012 to 2026 with term bonds due in 2031, 2036 and 2041. Serial coupons range from 2% to 5.25%. The 2031 bonds have a 5% coupon priced at 98.508. The 2036 bonds have a 5.125% coupon priced at 97.32, and the 2041 bonds have a 5.25% coupon priced at 98.073.

Jefferies & Co. was the senior manager for the bonds (A3).

Drexel is located in Philadelphia.

Dasny to sell school bonds

Looking to upcoming offerings, the Dormitory Authority of the State of New York announced plans Thursday to price $332.88 million of series 2011 school districts revenue bond financing revenue bonds. Pricing is expected during the week of May 9.

The sale includes $267.825 million of series 2011A bonds (A1/A+/A+), $39.75 million of series 2011B bonds (A3/A+/A+), $7.885 million of series 2011C bonds (Aa3/A+/A+) and $17.42 million of series 2011D bonds (A2/A+/A+), said a preliminary official statement.

The senior managers are Jefferies and RBC Capital Markets LLC.

Proceeds will be used to finance school district capital facilities and capital equipment and to refinance bond anticipation notes.

Connecticut passes budget

On the political front, the State of Connecticut passed a $40 billion two-year budget, up from $37.6 billion in 2009, said Schankel.

The revenue side of the new budget includes $2.6 billion of income and sales tax increases. The sales tax rate will increase to 6.35% from 6%, said Schankel, and the top income tax bracket will rise to 7% from 6.5%.

"Other states, such as New Jersey and New York, have taken a different path, eschewing tax increases and instead focusing on spending cuts, but most states are making the difficult decisions to achieve fiscal balance by working with both sides of the equation," Schankel said.

Connecticut is slated to come to market in the near future with $353.085 million of series 2011 general obligation bonds through Morgan Stanley & Co. Inc. and Siebert Brandford Shank & Co. LLC.

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