Munis weaken with Treasuries amid light supply; North Texas Tollway to price $1.03 billion

By Sheri Kasprzak

New York, April 8 - Municipal yields, particularly on the long end, were once again weaker on Friday despite light activity on both the primary and secondary fronts, market insiders said. Meanwhile, primary action for the coming week will remain light, highlighted by a large offering from the North Texas Tollway Authority.

"Long bonds are off by 2 to 3 [basis points]," reported one trader during the session.

"I feel like we're probably just following Treasuries, but there is this sense that supply is coming and that's setting the market into a panic."

Another trader noted that supply will likely just make things worse for municipals.

"We haven't even been able to handle the little supply we've had," he noted.

"There's very little supply pressure right now, and yields are rising anyway. If you throw in a few good-sized deals to that mix, yields are probably going to jump even more."

Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC, agreed that supply will increase in the coming months and the market might not be able to handle it.

"This could be the lull before the storm as most market observers expect issuance volume to jump significantly in the months to come," Kozlik said Friday.

"Concern exists over the market's ability to absorb the onslaught."

North Texas deal planned

Leading the light primary calendar for the week ahead, the North Texas Tollway Authority will price $1.029 billion of series 2011 revenue bonds and taxable bond anticipation notes.

The sale includes $606.467 million of series 2011 special projects revenue bonds and $422.315 million of series 2011 taxable bond anticipation notes.

Citigroup Global Markets Inc. is the senior manager.

Proceeds will be used to make an upfront payment to the Texas Department of Transportation for the authority's right to own and operate an 11.5-mile toll stretch of State Highway 161 in western Dallas County extending from State Highway 183 to Interstate 20.

The authority is based in Dallas.

Chicago airport deal poised

Another major sale just over the horizon is the long-awaited Chicago sale of series 2011 passenger facility charge revenue bonds for the Chicago O'Hare International Airport. Those bonds are expected to price during the week of April 18 through Citigroup and Siebert Brandford Shank & Co. LLC.

Proceeds will be used to make improvements to the airport, to refund grant anticipation bonds and commercial paper notes and to make debt service payments.

Louisiana offering ahead

Out on the horizon, the Louisiana Public Facilities Authority is set to price $509 million of series 2011A Libor floating-rate taxable student loan-backed bonds, said a preliminary official statement.

The sale includes $151 million of series 2011A-1 bonds, $248 million of series 2011A-2 bonds and $110 million of series 2011A-3 bonds.

The 2011A-1 bonds are due April 26, 2021, and the 2011A-2 bonds are due April 26, 2027. The 2011A-3 bonds are due April 25, 2035.

RBC Capital Markets LLC and Merrill Lynch are the senior managers.

Proceeds will be used to refund existing debt.

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