Munis finish out week mostly flat following rally; new issue calendar bulks up for coming week

By Sheri Kasprzak

New York, Sept. 9 - Municipals closed out the week on a flat note but with a firmer tone, said market insiders. Meanwhile, the new-issue calendar for the coming week looks a bit beefier than previous weeks.

Thursday's rally helped push yields down to near record levels.

"The tide carried all bond boats higher Thursday (as well as some cars and trucks near rivers) as Treasuries again had a strong session and munis followed," wrote Alan Schankel, managing director with Janney Montgomery Scott LLC, in a report released Friday.

"Muni-to-Treasury ratios remain elevated, above 100% in most maturities, reaching 111% for 30-year bonds."

Meanwhile, 10-year municipals have returned 11% so far this year, said J.R. Rieger, senior vice president of fixed income indexes at Standard & Poor's.

"Muni bonds in the 10-year range have seen yields drop over 110 bps this year, driving bond prices up resulting in a total return for this range of bonds of over 11%," Rieger wrote Friday.

"New issues of municipal bonds remain below the pace set in past years, and that sustains a supply/demand imbalance. Flight to quality drivers are a big component of the demand as the municipal bond market simply hasn't seen anywhere near the deluge of defaults projected by some analysts prior to the start of the year."

Metro Transit of Harris prices

Looking to primary action, the Metropolitan Transit Authority of Harris County, Texas, came to market with $510.56 million of series 2011 sales and use tax bonds, said a pricing sheet.

The bonds (Aa2/AA/) were sold through Goldman Sachs & Co.

The offering included $462.98 million of series 2011A bonds and $47.58 million of series 2011B contractual obligations.

"The bonds are secured by a portion of the sales and use tax collected in the metro area," Schankel noted of the transaction.

"Demand was strong enough to allow yield adjustments 2 to 3 bps lower in longer maturities."

Proceeds will be used to fund the costs of two light rail lines as part of the authority's MetroRail light rail system, to purchase 100 hybrid electric transit buses and to refund existing commercial paper notes.

New York Thruway sale prices

In other new deals, the New York State Thruway Authority priced $351.895 million of series 2011A state personal income tax revenue bonds, said a pricing sheet.

The bonds were sold through Siebert Brandford Shank & Co. LLC.

The bonds are due 2012 to 2026 with 1.5% to 5% coupons and 0.15% to 3.28% yields.

Proceeds will be used to make grants to reimburse municipalities and other project sponsors for highway, bridge and multimodal projects.

LIPA to power deal

Moving to upcoming offerings, the Long Island Power Authority announced plans Friday to sell $250 million of series 2011A electric system general revenue bonds, said a preliminary official statement.

The bonds (A3/A-/A) will be sold on a negotiated basis with Morgan Stanley & Co. LLC as the senior manager.

Proceeds will be used to fund capital expenditures.

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