Munis firm in another quiet session; little impact expected on L.A. sale from California crisis

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, July 7 - Activity in both the primary and secondary municipals markets remained fairly quiet on Tuesday ahead of what might prove to be an active Wednesday and Thursday.

The municipal market traded slowly on Tuesday with 15-year MMD trading 3 basis points to 6 bps wider.

"Some folks are saying that munis might be a couple of basis points off in the high grades," said Tom Kozlik, a Janney Montgomery Scott LLC municipal market analyst.

Despite the budget crisis in California, Thursday's scheduled offering of $1.039 billion tax and revenue anticipation notes from Los Angeles is expected to go off without a hitch.

"Depending on how positively the market looks at California's current strategy of the IOUs and the other things they're doing, we're really not expecting that to have a tremendous effect on the overall market," Kozlik said.

No critical harm will be inflicted, "all things being equal," he added, assuming that the situation in Sacramento does not get significantly worse.

At the current moment, "we're not seeing any trading discrepancies," he said.

"I don't think people are running for the hills," he said, but California remains the focus because of its size and "it is a little worse than some states."

The market then has to consider the idea of a California contagion, he said.

"The fact of the matter is that they set some kind of precedent," he said, noting other troubled states such as Connecticut, Ohio and Pennsylvania.

Another trader on Tuesday said he felt the market was mostly firmer but may have had a few touches of weakness here and there.

"Overall, we're looking a little firmer, I'd say," he added.

Lafayette sells bonds

Moving to light primary activity, Lafayette, La., priced $61.55 million in series 2009 public improvement sales tax bonds Tuesday, but the pricing details will not be available until Wednesday, an insider told Prospect News.

The sale included $30.61 million in series 2009A Build America Bonds, $27.3 million in series 2009B Build America Bonds and $3.64 million in series 2009A economic recovery Build America Bonds.

Morgan Keegan & Co. Inc. was the senior manager, and proceeds will be used to construct, acquire, expand and improve public works for the city.

Abag to sell bonds

Looking to upcoming sales, another deal is coming out of California. The Abag Financial Authority for Nonprofit Corporations in California is set to sell $140 million in series 2009B revenue bonds for Sharp HealthCare on July 21, said a preliminary official statement.

The bonds (A3/A-/) will be sold through senior manager Citigroup Global Markets Inc.

The maturities have not yet been set.

Proceeds will be used to construct, equip, acquire and renovate health facilities as well as to refinance taxable loans.

The Abag Financial Authority has its headquarters in Oakland, Calif.

Secondary firms up

Moving to the secondary market, traders said volume remained fairly light, but the tone firmed slightly.

In light trading action for the day, Miami-Dade County's special obligation subordinated bonds were moving. The 7.2% 2042 bonds were seen at 8.081%.

Elsewhere, the Kentucky State Property and Buildings Commission's project No. 95 bonds were seen trading. The 5% 2013s were seen at 2.6%.

In other news, certificates of participation issued by Charlotte, N.C., were also in action. The 5% 2034s were seen at 4.744%.

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