Texas brings $5.5 billion in TRANs at 0.48%; Pennsylvania sells $690 million in G.O. bonds

By Sheri Kasprzak

New York, Aug. 25 - The State of Texas and the Commonwealth of Pennsylvania dominated the primary market Tuesday, selling more than $6 billion in bonds between the two. Meanwhile, the secondary market was seen mostly unchanged in another day of light trading action.

"I'm thinking the primary is really distracting attention [away from the secondary market]," said one trader reached in the afternoon.

"We're really looking basically unmoved. Maybe a touch weaker out on the long end, but really mostly flat."

Down in the Lone Star State, Texas brought $5.5 billion in series 2009 tax and revenue anticipation notes with a weighted net interest cost of 0.48% and a 2.5% coupon, said a pricing sheet. The notes are due Aug. 31, 2010.

The notes (MIG 1/SP-1+/F1+) were seen reoffered Tuesday afternoon at 0.44%.

"We feel pricing looks pretty reasonable," one sellside market source said.

"It's pretty much [in] line with trading right now. It hasn't moved much in reoffering. That's always a good indicator that pricing was fair."

Nine bidders took pieces of the offering, including Ramirez & Co. Inc.; Citigroup Global Markets Inc., Wells Fargo Securities Inc.; Morgan Stanley & Co. Inc.; Barclays Capital Inc.; First Southwest Co.; Goldman, Sachs & Co.; Piper Jaffray & Co.; and J.P. Morgan Securities Inc.

"Where it priced makes sense," said Tom Kozlik, municipal credit analystJanney Montgomery Scott LLC.

"For $5.5 billion in notes, there were almost $30 billion in bids. That's a good number, considering that Texas TRANs are liquid securities. They are setting the benchmark [for the rest of the year]."

Proceeds will be used to fund general capital expenses ahead of the collection of taxes and revenues.

Pennsylvania sells $690 million

In other major primary offerings, Pennsylvania priced $689.625 million in series 2009 second refunding general obligation bonds Tuesday, said a pricing sheet.

The bonds were sold competitively with Merrill Lynch & Co. Inc. winning the bid.

The bonds are due 2010 to 2021 with coupons from 3% to 5%. Yields ranged from 0.6% to 3.21%.

"It priced in line with where Pennsylvania paper's been trading for the past couple of months," Kozlik said.

"There was an issue in May that JPMorgan won that was only about 10 bps to muni high-grades. This deal with Merrill [Lynch] had spreads at 25 bps. If you had asked me the question yesterday of where I expected it [to price], it would have been in the 10 to 20 bps range. Where I priced in May was a reflection of aggressive pricing. The 25 bps they got is where the market should be based on the budget situation. Moody's downgraded the outlook [of Pennsylvania bonds] yesterday. It's not surprising given what's going on in Pennsylvania."

The commonwealth has been at an impasse in settling a budget that would fill its multibillion-dollar gap.

Proceeds will refund 14 of the commonwealth's bond issues.

Peralta CCD prices G.O.s

Elsewhere Tuesday, the Peralta Community College District in Oakland, Calif., priced $100 million in series 2009 G.O. utility bonds, said a sellside source close to the deal.

The bonds were sold through senior manager Stone & Youngberg LLC.

The bonds are due 2010 to 2029 with term bonds due 2032 and 2039. Coupons range from 3% to 5.5%.

Proceeds will be used to fund utility improvements throughout the college district.

Billions to round out week

Wednesday will feature another major offering of the week. The Dallas County Hospital District in Texas is gearing up to sell $705 million in series 2009 limited-tax bonds.

The deal includes $26.1 million in series 2009A bonds, $185.035 million in series 2009B Build America Bonds and $493.865 million in series 2009C Build American Bonds.

Merrill Lynch is the senior manager.

Proceeds will be used to construct new hospital facilities and renovate existing facilities.

The final billion-dollar deal of the week will come to market Thursday. The M-S-R Energy Authority in California is set to price $1,015,855,000 in series 2009 gas revenue bonds.

That offering includes $199.965 million in series 2009A bonds, $497.21 million in series 2009B bonds and $318.68 million in series 2009C bonds.

Proceeds will finance the prepayment of a natural gas agreement.

Secondary seen unchanged

Moving back to the secondary market, traders saw little volume and a mostly unchanged tone.

"There's really not a lot to report," one trader noted before adding that the tone of the market is relatively unmoved.

In specific trading action, the State of Illinois saw its recently priced certificates of participation moving. The 2% June 2010s were seen at 1.12% after pricing at 1.15%. The 2% April 2010s were seen at 0.926% after pricing at 1.06%.

Elsewhere, the Regents of the University of California's Build America Bonds that priced last week were trading. The 6.27% 2031 bonds were trading at 5.97% after pricing at par.

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