Municipal bond yields end session mostly firmer; New York State offers $317.08 million bonds

By Sheri Kasprzak

New York, Dec. 2 - Municipal yields were mostly firmer on Friday as new-issue supply tapered off, market insiders said. After a big week for new deals, Friday's activity was extremely light, despite continued strong demand for municipals, said one trader.

"The supply has been good for us," he said.

"Demand is still very strong, especially for quality. There's been a huge demand for highly rated debt, and there's been more out there than there has been. There should be more coming in the next week."

Municipals have been outperforming Treasuries, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"Based on MMD AAA benchmarks, the differential is 277 bps for 5- and 30-year yields, up from a recent low of 236 bps in mid-October," wrote Schankel in a report released Friday.

"M/T [Municipals-to-Treasury] ratios remain elevated, but below recent highs with further declines likely given light forward new issue supply. Demand will be buoyed by at least $27 billion in redemptions and maturities in December."

New York State deal set

Looking to the coming week's action, the State of New York is expected to sell $317.075 million of series 2012 general obligation bonds on Tuesday, according to a preliminary official statement.

The offering includes $285.92 million of series 2011E tax-exempt bonds and $31.155 million of series 2011F taxable bonds.

The bonds will be sold competitively with Public Resources Advisory Group LLC as the financial adviser.

The 2011E bonds are due 2012 to 2041, and the 2011F bonds are due 2012 to 2021.

Proceeds will be used to fund capital projects, including clean air and water initiatives and transportation projects.

New Jersey to sell TRANs

Across the Hudson, the State of New Jersey will offer up $2.15 billion of series 2012 tax and revenue anticipation notes on Tuesday.

The 2% notes are due June 21, 2012, and the proceeds from the competitive offering will be used to provide cash flow management for revenues and expenditures of the general fund and the property tax relief fund during the 2012 fiscal year.

University of Houston on tap

Also coming up on Tuesday, the University of Houston System is scheduled to price $299.5 million of series 2011 consolidated revenue and refunding bonds in two tranches.

The bonds (Aa2/AA-/) will be sold competitively.

The deal includes $278.055 million of series 2011A bonds, which are due 2013 to 2043, and $21.445 million of series 2011B bonds, which are due 2013 to 2037.

Proceeds will be used to refund the university system's series 2002A-B consolidated revenue bonds and commercial paper.

More supply prices

In primary action, the California Department of Veterans Affairs priced $101.15 million of series 2011 home purchase revenue bonds, according to a pricing sheet. The offering was downsized from $176.715 million.

The deal included $97.12 million of series 2011A non-AMT bonds and $4.03 million of series 2011B AMT bonds.

The 2011A bonds are due 2013 to 2022 with term bonds due in 2025 and 2028. The serial coupons range from 0.625% to 3.625%, all priced at par. The 2025 bonds have a 4.25% coupon priced at 99, and the 2028 bonds have a 4.5% coupon priced at 99.505.

The lead managers for the bonds (Aa3/AA/AA-) were Bank of America Merrill Lynch and SL Hare Capital LLC.

Proceeds will be used to refund existing debt.

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