Municipals firm again despite San Bernardino bankruptcy; Alexandria, Va., sells $94.16 million

By Sheri Kasprzak

New York, July 11 - Municipal yields were firmer again on Wednesday as new issues were well-received and the secondary market got a shot in the arm, said traders.

"Technicals are still good, and we're seeing healthy interest on both sides," one trader said.

"Primary is definitely getting a good reception, but trading is starting to pick up again as well. We're outperforming Treasuries."

The market didn't seem to blink at the news that San Bernardino, Calif., announced its plans to file for bankruptcy. The city will be the third California city in a month to file for bankruptcy protection. Stockton and Mammoth Lakes both announced plans to file for bankruptcy earlier.

Standard & Poor's responded to the news by downgrading the city's lease revenue bonds to CC from BBB+.

In the broader market Wednesday, Alan Schankel, managing director with Janney Montgomery Scott LLC, said demand could improve thanks to a tax cut proposal by President Barack Obama.

"Muni may see some demand tailwinds based on President Obama's proposal to extend tax cuts only for taxpayers earning $250,000 or below," Schankel wrote.

"If rates for wealthier investors revert to 39.6% as scheduled at year-end, tax-free income will become marginally more valuable."

New York Transitional Finance holds retail order period

Meanwhile, the New York City Transitional Finance Authority held its first retail order period for its $850 million sale of fiscal 2013 series S-1 building aid revenue bonds (Aa3/AA-/AA-).

The 30-year maturity preliminarily priced with a 4% coupon to yield 4.05%, said Schankel.

The offering, which will be sold through J.P. Morgan Securities LLC, will open to institutional investors on Thursday.

Proceeds will be used to pay a portion of the costs of one or more of the five-year plans approved by the authority for educational facilities.

Alexandria's $94.16 million

In primary action, the City of Alexandria, Va., brought to market $94,155,000 of series 2012 general obligation bonds, said a pricing sheet.

The offering included $76.82 million of series 2012B G.O. capital improvement bonds and $17,335,000 of series 2012C refunding bonds.

The 2012B bonds are due 2013 to 2033 with 2% to 5% coupons. The 2012C bonds are due 2013 to 2018 and 2023 to 2025 with coupons from 2% to 4%.

The bonds (Aaa/AAA/) were sold competitively with Citigroup Global Markets Inc. winning the bid for the G.O. bonds at a 2.557134% true interest cost and Bank of America Merrill Lynch winning the refunding bonds at a 1.963666% TIC, said Nathan Carrick, spokesman for the city.

"The market was favorable today," Carrick said.

Carrick said there were eight bidders for the G.O. bonds and nine bidders for the refunding bonds.

Proceeds will be used to finance capital improvement projects for the city, including public schools, parks and buildings, capital contributions to the Washington Metropolitan Area Transit Authority, infrastructure improvements and maintenance, affordable housing, sanitary sewers, storm water management, traffic control and improvement technology, as well as to refund the city's series 2004C and 2006A G.O. bonds.

Texas sells school bonds

In other new-issue news, the State of Texas priced $85,615,000 of series 2012 college student loan G.O. bonds, said a pricing sheet.

The bonds (Aaa/AA+/) were sold competitively with RBC Capital Markets LLC winning the bid, said Arturo Alonzo, deputy commissioner for finance and administration with the Texas Higher Education Coordinating Board. The TIC came in at 2.71%, Alonzo said.

The bonds are due 2016 to 2035 with 3% to 5.5% coupons.

The board received nine bids for the bonds, said Alonzo.

"After reviewing current market conditions and consulting with the board's financial adviser, Estrada Hinojosa & Co. Inc., the board determined that a competitive sale was the preferred method of sale," Alonzo said Wednesday.

"This was the board's first competitive transaction since June 3, 2008."

Alonzo said the board last came to market with a negotiated transaction on July 21, 2011. The board then sold $118.6 million of new money bonds at a 4.52% TIC.

Proceeds will be used to fund various student loan programs operated by the state.

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