Yields drop as stocks plummet; Puerto Rico Public Buildings Authority brings $756.45 million

By Sheri Kasprzak

New York, Aug. 10 - Municipal yields were seen lower by 1 basis point to 8 bps on Wednesday as Treasuries responded to a major dive in the stock market, insiders reported.

Ten-year munis were the most improved, with yields down 8 bps. Thirty-year munis were down almost 5 bps.

The boost for munis comes as the Dow Jones Industrial Average plummeted nearly 520 points, or 4.62%, on Wednesday. The Nasdaq was down by more than 101 points, or 4.09%.

Meanwhile, Standard & Poor's, which downgraded 11,500 AAA-rated municipal bonds to AA+ following its downgrade of the U.S. government's debt, said Wednesday that many muni issuers will keep their AAA rating until the ratings agency has a clearer picture of the United States' spending cuts plan.

The word was relief to some market insiders.

"It's temporary comfort," said one trader reached during the session.

"A lot is still up in the air, and investors, retail especially, don't like uncertainty. It's breathing room for us in a sense. It's a good thing for the time being."

Health care downgrades loom

In other ratings news, Moody's Investors Service reported Wednesday that potential downgrades loom for the nonprofit health-care sector amid dropping revenues, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Schankel also noted that Fitch Ratings has voiced concerns that rating pressures are rising for some of Florida's school districts. The districts, Schankel said, face financial pressure from a 9.1% state aid decline over fiscal year 2011 as well as lower property taxes as a result of a statewide 26% property value drop from 2008 to 2011.

Puerto Rico authority prices

Heading up Wednesday's light primary action, the Puerto Rico Public Buildings Authority priced $756.449 million of series 2011R taxable government facilities school construction revenue bonds, said a pricing sheet.

The bonds (Baa1//BBB+) were sold through senior manager Popular Securities Inc.

The bonds are due in 2028 and have 5.75% or 5.8% coupons.

Proceeds will be used to construct new school facilities within the commonwealth.

Indiana Finance preps big deal

Looking ahead, the Indiana Finance Authority announced plans Wednesday to price $1.021 billion of series 2011 wastewater utility revenue bonds.

The offering includes $698.89 million of series 2011A first-lien bonds, $274.2 million of series 2011B second-lien bonds and $47.91 million of series 2011C second-lien bonds, said a preliminary official statement.

The bonds will be sold through senior manager Morgan Stanley & Co. LLC.

The 2011A bonds are due 2012 to 2026 with term bonds due in 2031 and 2041. The series 2011B bonds are due 2014 to 2026 with term bonds due in 2031 and 2041. The series 2011C bonds are due in 2016.

Proceeds will be used to acquire a wastewater system from Citizens Energy Group and to make upgrades to the wastewater system.

Dasny set to price

Also ahead, the Dormitory Authority of the State of New York plans to price in one or more sales $426.075 million of 30-year tax-exempt and/or taxable, fixed and/or variable-rate bonds on behalf of the North Shore-Long Island Jewish Obligated Group, said a statement from the authority.

The bonds will be sold on a negotiated basis with Citigroup Global Markets Inc. as the senior manager.

Proceeds will be used to construct an addition at Zucker Hillside Hospital to replace 115 beds; to construct a parking facility at Huntington Hospital; to refund the obligated group's series 2001A, 2001B and 2001D debt issued through the Nassau County Industrial Development Authority; and to refund bonds issued on behalf of Franklin Hospital, Southside Hospital, Staten Island University Hospital, Huntington Hospital and Lenox Hospital.

Century bonds ahead

In other upcoming deals, the University of Southern California will come to market in the near future with rare century bonds. The university plans to sell $300 million of series 2011 taxable bonds, said a preliminary official statement.

The bonds (Aa1/AA/) will be sold on a negotiated basis with Morgan Stanley and Goldman Sachs & Co. as the senior managers.

The bonds are due Oct. 1, 2111.

Proceeds will be used to fund general capital needs, including renovations and repairs to university properties.

The university is located in Los Angeles.

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