Market continues to stay positive amid massive supply; Idaho brings $500 million TANs at 0.4%

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, June 23 - A generally positive tone carried investors through the session on Tuesday, even as the primary municipals market continued to dominate.

Investors continued to burn the market at both ends by chasing either high yields or highly rated bonds.

California general obligation bonds have been seen as a good bargain, but with the ongoing problems in Sacramento, "there is a very high probability of a ratings downgrade," Janney Montgomery Scott fixed income director Guy LeBas said.

The budget is mired in procedure, he said. "Anything big has to come to a vote," and no politicians want to turn their backs on important programs.

"[It will be] very, very tough for people to take their medicine," he said.

Elsewhere, a trader noted that primary action may be tapering off, though he feels it's a seasonal thing rather than any sort of market problem.

"Conditions look fine," he said.

"I think we've had an overloaded calendar for the last month or so and now things are cooling off. It happens in the summer. I'd say it's pretty typical."

Idaho sells TANs

Looking to Tuesday's primary calendar, the State of Idaho sold $500 million in series 2009 tax anticipation notes, said Shawn Nydegger, investment officer with the state treasurer's office.

The notes (MIG 1/SP-1+/F1+) were sold through senior manager Seattle-Northwest Securities Corp.

The 2.5% notes are due 2010 and priced to yield 0.4%.

Proceeds will be used to fund general expenses ahead of the collection of taxes.

Tuolomne Wind deal

In other pricing news, the Tuolomne Wind Project Authority in Goldendale, Wash., was seen nearly ready to price its negotiated deal for $430 million in series 2009 Build America Bonds and non-Build America Bond revenue bonds (A1/A+/A+).

The authority priced $180 million of the non-Build America Bonds at MMD plus 109 basis points for the 2013 maturity and at MMD plus 140 bps for the 2019 maturity, LeBas said.

"It's a pretty decent spread," he said.

Shortly before pricing, the $250 million of Build America Bonds looked to price at MMD plus 200 bps to 210 bps, he said.

"That's cheaper than a lot of BAB issues," he said, but the A1 or A+ credit "may be a bit welcome."

Still, "the BABs are too low-yielding for some investors," he added.

Citigroup Global Markets Inc. was scheduled to act as underwriter for the bonds, which are being sold in order to develop the authority's wind energy projects.

Fresno County prices

Also out west, Fresno County in California priced $95 million in series 2009-10 tax and revenue anticipation notes, said a sellside source connected to the deal.

The notes (/SP-1+/) were sold on a competitive basis with Barclays Capital Inc. as the winning bidder. The true interest cost came in at 0.4592%. KNN Public Finance was the financial adviser.

The notes are due June 30, 2010, and the coupon came at 2%, priced at par.

Proceeds will be used to fund general expenses ahead of the collection of taxes and revenues.

The county seat is Fresno, Calif.

Dasny sale set

In upcoming offerings, the Dormitory Authority of the State of New York is scheduled to sell its previously announced $800 million in series 2009B state personal income tax bonds on Wednesday, said a sellside source familiar with the deal.

The bonds (/AAA/AA) will be sold through J.P. Morgan Securities Inc. and are due 2010 to 2039.

Proceeds will be used to fund capital projects.

Secondary market firms

Even though the municipals market continued to firm, a trader said Tuesday that the secondary market remained mostly unchanged.

"We're really little changed," said the trader. "Firmer tone, but trading has been still pretty light."

Looking at specific trades, the series 2009A water and wastewater bonds sold by the City of Atlanta last week continued to be popular in the secondary market, a trader noted. The 6.25% 2039 bonds were seen at 5.987% on Tuesday. The 5% 2022s were seen at 4.6%.

The Dauphin County General Authority of Pennsylvania's recently priced revenue bonds for Pinnacle Health System were also moving. The 6% 2026 bonds were seen at 6.115%.

The Puerto Rico Sales Tax Financing Corp.'s recently priced sales tax revenue bonds were also seen in action. The 5% 2039 bonds were seen at 4%.

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