Municipals flat to slightly firmer as market seeks direction; Austin, Texas, preps offering

By Sheri Kasprzak

New York, Aug. 19 - Municipals closed the week on a more subdued note following Thursday's rally, with yields stable to slightly firmer, market insiders reported. With little to move the market, yields were seen flat to about 3 basis points better, said one trader.

The week ahead looks to be a bit slower for the primary market, said the trader, and investors are likely sitting on their hands, waiting to see what happens.

"It's been mostly quiet, but I think everyone is waiting to see how next week shapes up," he said.

In the primary market, "there's not as much coming up," he added.

Among the larger offerings for the coming week is a $137.69 million issue of series 2011 certificates of obligation and public improvement bonds from the City of Austin, Texas. The city will bring the bonds to market on Thursday, according to notices of sale.

The offering includes $51.15 million of series 2011 certificates of obligation, $78.09 million of series 2011A tax-exempt public improvement bonds and $8.45 million of series 2011B taxable public improvement bonds.

The bonds (/AAA/AAA) will be sold competitively with Public Financial Management Inc. as the financial adviser.

The 2011 certificates of obligation are due 2012 to 2041. The 2011A public improvement bonds are due 2012 to 2031, and the 2011B public improvement bonds are due 2014 to 2031.

Proceeds from the offering will be used to refund a portion of the city's outstanding obligations for a savings, while the remainder will be used to finance municipal improvements.

University taps market

In other primary market news, the Board of Regents of the University of California issued $400.15 million of series 2011 general revenue bonds recently, according to a pricing sheet.

The bonds (Aa1/AA/AA+) were sold through senior managers Barclays Capital Inc. and Morgan Stanley & Co. Inc.

The offering included $355.31 million of series 2011AB tax-exempt bonds and $44.84 million of series 2011AC taxable bonds.

The 2011AB bonds are due 2012 to 2031 with term bonds due in 2034, 2035 and 2041. The serial coupons range from 0.3% to 5%. The 2034 bonds have a 5% coupon priced at 105.654, and the 2035 bonds have a 5% coupon priced at 105.167. The 2041 bonds have a 5% coupon priced at 104.764.

The 2011AC bonds are due 2012 to 2021 with term bonds due 2031 and 2041. The serial coupons range from 0.65% to 3.548%, all priced at par. The 2031 bonds have a 4.797% coupon priced at par, and the 2041 bonds have a 5% coupon priced at par.

Proceeds will be used to finance or refinance capital projects, as well as to refund the university's series Q revenue bonds.

Rochester University prices

Another university deal came to market as well, this one sold through the Monroe County Industrial Development Corp. of New York. The corporation priced $161.66 million of series 2011 tax-exempt revenue bonds for the University of Rochester on Thursday, according to a term sheet.

The offering included $122.34 million of series 2011A bonds and $39.32 million of series 2011B bonds.

The 2011A bonds are due 2012 to 2031 with term bonds due in 2036 and 2041. The serial coupons range from 2% to 5%. The 2036 bonds have a 5% coupon priced at 103.609, and the 2041 bonds have a 5% coupon priced at 103.129.

The 2011B bonds are due 2012 to 2031 with term bonds due in 2035 and 2041. The serial coupons range from 2% to 5%. The 2035 bonds have a 4.5% coupon priced at 98.271, and the 2041 bonds have a 5% coupon priced at 103.129.

J.P. Morgan Securities LLC and Barclays Capital Inc. were the senior managers for the bonds (Aa3/A+/AA-).

Proceeds will be used to fund improvements to the university's main campus, including the construction of a new dining hall; the construction of a new digital media building; the renovation and modernization of laboratories, classrooms, aquatic center, indoor track and residence halls; and the construction of a new three-story building to house the university's school of education.

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