Yields continue to weaken ahead of holiday; L.A. Airports brings $875.81 million revenue bonds

By Sheri Kasprzak

New York, Nov. 10 - Municipal yields were yet again weaker as the market prepared to shut down for the Veterans Day holiday on Thursday. One trader said long bonds were up as much as 5 basis points and weakness was seen across the curve.

"You really would think that a shorter week would mean less supply, but that just hasn't been the case this week," said one trader.

"It is remarkable. We are starting to see some decent secondary activity out there. Basically, we'd have a huge push of new issues and nothing trading, but that seems to be slowly changing."

Looking to a more specialized sector, the outlook for tobacco bonds is murky, said Alan Schankel, managing director with Janney Montgomery Scott LLC. Schankel said master settlement agreements payments have fallen short of projects as cigarette smoking has declined.

"Ironically, most states which raised money using tobacco bonds also passed laws limiting smoking in public places and raising taxes on tobacco products," Schankel noted.

"Illinois, facing ongoing financial challenges, will test the market for tobaccos, with an anticipated $1.75 billion issue after Thanksgiving, helping the state meet a December 31 deadline for plugging a $2 billion hole."

The state's Railsplitter Tobacco Authority is set to price $1.46 billion of series 2010 tobacco settlement revenue bonds through Barclays Capital Inc. and Citigroup Global Markets Inc.

L.A. airports brings bonds

Meanwhile, Wednesday's slightly more subdued primary calendar was led by the Los Angeles Department of Airports' offering of $875.805 million of series 2010D senior airport revenue bonds for the Los Angeles International Airport, said a pricing sheet.

The bonds (Aa3/AA/AA) were sold through J.P. Morgan Securities LLC and Ramirez & Co. Inc.

The bonds are due 2012 to 2030 with term bonds due 2033, 2035 and 2040. Serial coupons range from 3% to 5.5%. The 2033 bonds have a 5.25% coupon priced at 103.386. The 2035 bonds have a split maturity with a 4.75% coupon priced at 96.766 and a 5% coupon priced at 100.147. The 2040 bonds have a 5% coupon priced at 99.235.

Proceeds will be used to finance capital improvements at Los Angeles International Airport, including the addition of taxiways and the expansion of airport facilities, as well as to refund existing commercial paper.

Santa Clara drives bonds

Another large sale on Wednesday came from the Santa Clara Valley Transportation Authority of California. The authority brought $645.89 million of series 2010 sales tax revenue bonds, according to a sales sheet. The offering was downsized from $700 million.

The deal included $469.73 million of series 2010A Build America Bonds and $176.16 million of series 2010B tax-exempt bonds.

The 2010A bonds are due 2021 to 2023 with a 2032 term bond. The serial coupons range from 4.649% to 5.099%, all priced at par. The 2032 bonds have a 5.876% coupon priced at par.

The 2010B bonds are due 2015 to 2020 with 3% to 5% coupons.

The bonds (Aa2/AA+/) were priced through senior manager Barclays Capital.

Proceeds will be used to finance capital improvements to the county's commuter projects.

The authority is based in San Jose, Calif.

Gainesville powers deal

In other pricings, the City of Gainesville, Fla., sold $161.74 million of series 2010 utility system revenue bonds, said a pricing sheet.

The bonds (Aa2) were sold Wednesday through Goldman, Sachs & Co.

The sale included $12.93 million of series 2010A federally taxable bonds, $132.445 million of series 2010B Build America Bonds and $16.365 million of series 2010C tax-exempt bonds.

The 2010A bonds are due Oct. 1, 2030 and have a 5.874% coupon priced at par, and the 2010B bonds are due Oct. 1, 2040 and have a 6.024% coupon priced at par. The 2010C bonds are due 2015 to 2019 with a term bond due 2034.

Proceeds will be used to finance capital improvements to the city's utility system as well as refund its series 2003A and 2008A bonds.

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