Municipals close flat to slightly weaker; Philadelphia to sell $272.23 million of G.O. bonds

By Sheri Kasprzak

New York, March 25 - Municipals rounded out a tough week on a slightly sour note, with intermediate maturities seen weaker by a basis point or two. The rest of the market remained flat, traders reported.

"There's not a lot going on," said one trader of Friday's activity.

"The middle [of the yield curve] has been struggling for most of the week, so that's where today's trouble is. Not off by more than 2 bps, though. It's quiet."

Meanwhile, tax-free fund outflows may still outpace inflows, but the outflows are getting lighter, said Alan Schankel, managing director with Janney Montgomery Scott LLC, on Friday.

"Tax-free fund flows remain negative, although outflows are occurring at a slower pace than in late 2010," Schankel reported.

"Fourth-quarter 2010 data from the Fed showed $8.5 billion of outflows, but individual direct investors increased holdings by $50 billion in the period, more than compensating for fund selling. We expect more of the same when Q1 2011 data comes out, as investors take advantage of the high relative and after-tax equivalent returns offered by municipal bonds."

The market is preparing to handle a slight increase in primary supply in the weeks ahead, market insiders have reported. With Chicago's oft-postponed $1 billion sale of Chicago O'Hare International Airport bonds looming in early April and a $1.3 billion sale from the North Texas Tollway Authority also coming up in the next month, traders are concerned that retail investors, who have shied away from the market given widespread rumors of defaults and bankruptcies, will greet the new supply with hesitation.

Georgia loan bonds price

During the week, the Georgia Environmental Loan Acquisition Corp. came to market with $202.755 million of series 2011 local government loan securitization bonds, said a pricing sheet.

The bonds (//A) were sold through Morgan Keegan & Co. Inc.

The bonds are due 2012, 2014, 2016, 2017, 2021 and 2031 with coupons from 0.54% to 5.125%.

Proceeds will be used to acquire environmental loans from the Georgia Environmental Finance Authority to establish a debt service reserve.

Philadelphia preps deal

Heading up the week's upcoming primary supply, the City of Philadelphia is slated to price $272.23 million of series 2011 general obligation bonds.

The bonds (A2/BBB/A-) will be sold through senior manager J.P. Morgan Securities LLC.

The bonds are due 2011 to 2031 with term bonds due in 2036 and 2041, said a preliminary official statement.

Proceeds will be used to refund the city's series 1998 G.O. refunding bonds and its 2001 G.O. bonds.

D.C. to sell Howard bonds

Also coming up, the District of Columbia announced plans to sell $288.965 million of series 2011 revenue bonds for Howard University during the week of April 4.

The sale includes $224.23 million of series 2011A bonds and $64.735 million of series 2011B bonds, said a preliminary official statement.

Merrill Lynch and Loop Capital Markets LLC are the lead managers.

Proceeds will be used to fund general upgrades, additions and construction to three of the university's campuses as well as to refund and advance refund some of the university's debt, including its 1998 and 2006A-B bonds.

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