Muni yields improve; new issues continue to see strong response; Vermont brings $90.96 million

By Sheri Kasprzak

New York, Sept. 26 - Municipals improved yet again on Wednesday as more supply flooded in and was met eagerly by investors in both the primary and secondary markets, traders reported.

"Yields were down by about 2 to 4 basis points," said a trader reached during the afternoon.

"Secondary is still pretty strong, mostly new issues from last week freed to trade. Primary is still the focus, but demand has been great enough that most everything is being absorbed right away."

Meanwhile, the State of California's general obligation bonds (A1//A-), which priced Tuesday, were adjusted lower compared to the retail order period, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

California yields lowered

"California finalized pricing on an upsized $1.7 billion two-part loan with yields adjusted lower compared to Friday's initial retail pricing," Schankel said Wednesday.

"The 10-year bonds, for example, started at a 2.51% yield but finalized six basis points lower at 2.45%."

The state priced $1,737,990,000 of bonds through RBC Capital Markets LLC. The deal included $961.75 million of various purpose G.O. bonds and $776.24 million of various purpose G.O. refunding bonds.

The G.O. bonds are due 2013 to 2022 with term bonds due in 2036, 2037 and 2042. The serial coupons range from 2% to 5%. The G.O. refunding bonds are due 2013 to 2030 with 4% to 5% coupons.

Proceeds will be used to fund various capital needs and to refund existing G.O. debt.

Vermont brings $90.96 million

In primary activity, the State of Vermont came to market with $90,955,000 of series 2012 G.O. bonds (Aaa//AAA), said a pricing sheet.

The deal included $26,765,000 of series 2012E G.O. bonds and $64.19 million of series 2012F G.O. bonds.

The 2012E bonds are due 2014 to 2024 with 2% to 5% coupons. The 2012F bonds are due 2013 to 2032 with 2% to 5% coupons.

The 2012E bonds were sold through senior manager Citigroup Global Markets Inc.

The 2012F bonds were sold competitively. J.P. Morgan Securities LLC won the bid with a 2.38% true interest cost, said Stephen Wisloski, debt manager for the state.

Proceeds will be used to finance improvements to state buildings, educational facilities and agricultural projects throughout the state.

"It's a combination of long-standing policy and what we discovered during the financial crisis," Wisloski said in an interview Wednesday of the state's decision to sell its debt on both a competitive and negotiated basis.

"We have a lot of citizens who like to buy our bonds, and with a competitive sale, you take a great rate, but you have no say over how the bonds are distributed. We put a priority on Vermont retail investors. After 2008, 2009, it was helpful to have the negotiated route, just as a backstop."

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