Munis hit bumpy patch as Treasuries tumble; San Diego USD brings $218 million short-term notes

By Sheri Kasprzak

New York, June 28 - Municipals hit a snag on Tuesday following some volatility in the Treasuries market, said traders.

Longer maturities took the brunt of the beating, with both 20- and 30-year yields seen 11 basis points higher at market close. One-year munis were off by 9 bps, and the rest of the market saw spotty weakness, the trader reported.

"From what I can tell, we're getting dragged along with Treasuries today," said the trader.

"There's nothing going on specifically [in munis] that would bring us down by this much."

Treasuries took a hit on Tuesday following low demand for a five-year note auction amid continued uncertainty in Greece. The five-year Treasury climbed 16 bps on the news.

Tobacco bonds have security

The market continued to wait for the two largest sales of the week, including a $975.555 million offering of series 2011 asset-backed revenue bonds from New York's Tobacco Settlement Financing Corp.

The corporation began a retail order period for the bonds late Monday, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Preliminary pricing on the short refunding portion of the issue brought yields of 2.1% in five years and 2.85% in seven years, the maximum available to retail investors, Schankel said.

"Unlike most issues back[ed] by tobacco settlement revenues, this deal has the additional security of New York State's pledge to pay from appropriations if needed," Schankel wrote in a report released Tuesday.

The tobacco deal includes $419.765 million of series 2011A bonds and $555.79 million of series 2011B bonds.

Barclays Capital Inc. and Citigroup Global Markets Inc. are the senior managers for the bonds (/AA-/AA-).

Proceeds will refund the corporation's series 2003A-1C and 2003B-1C bonds.

San Diego USD sells TRANs

In primary action, the San Diego Unified School District came to market with $218 million of series 2011-12 tax and revenue anticipation notes, said a pricing sheet.

The notes were sold through Citigroup and J.P. Morgan Securities LLC.

The notes are due Aug. 7, 2012 and have a 2% coupon priced at 101.913.

Proceeds will be used to finance general capital requirements ahead of tax and revenue collections.

U-Dub bonds price

Elsewhere in the competitive market, the University of Washington brought $211.37 million of series 2011A general revenue and refunding bonds Tuesday, said a pricing sheet.

The bonds (/AA+/) were sold competitively. The issuer did not return calls for the winning bidder by press time Tuesday evening.

The bonds are due 2012 to 2035 with 2% to 5% coupons.

Proceeds will be used to finance or repay commercial paper notes used to finance capital projects and to refund existing university debt.

The university is based in Seattle.

Oklahoma's student loan deal

Also during the session, the Oklahoma Student Loan Authority sold $205.2 million of series 2011-1 taxable Libor Oklahoma student loan bonds, said an official statement.

The bonds (/AAA/AAA) were sold through Bank of America Merrill Lynch.

The bonds are due June 1, 2040 and bear interest at Libor plus 115 bps.

Proceeds will be used to acquire eligible student loans from lenders or holders in the authority's network and to refund the authority's series 2008I-A1 variable-rate bonds.

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