Municipal yields firm up; Moody's downgrade halts Metropolitan Transportation Authority sale

By Sheri Kasprzak

New York, Feb. 3 - Municipal yields were once again seen firmer on Wednesday, with the short end of the curve seen better by as much as 2 basis points, a trader reported.

"It's been a fairly quiet day," said the trader.

"The short end is probably better by a couple of basis points. The long end is struggling to make any gains at all. It's basically unchanged out long, but there's a firmer feeling across the curve."

Meanwhile, some troubling news from Moody's Investors Service Wednesday forced the Metropolitan Transportation Authority of New York to postpone its planned $650 million in series 2010B revenue bond sale.

The ratings agency downgraded the authority's revenue bonds to A3 from A2, which prompted a halt of the sale.

"I don't think they're going to do anything with it until they hear from the other ratings agencies," said a sellsider familiar with the deal.

"It might take a few weeks for them to figure out the next move to make. They have had some problems with revenue generation, so that's an issue that the ratings agencies are looking at."

Meanwhile, Fitch Ratings reported that it is going to be watching the authority carefully, noting in a statement that a ratings action may be warranted if the authority is unable to achieve savings to combat an anticipated $350 million budget shortfall.

Barclays Capital Inc. is the senior manager for the proposed sale.

The offering includes $550 million in series 2010B-1 Build America Bonds and $100 million in series 2010B-2 tax-exempt bonds.

Proceeds from the postponed deal will be used to fund transportation projects.

Massachusetts education bonds price

In primary action, the Massachusetts Educational Financing Authority priced $407 million in series 2010 education loan revenue bonds on Wednesday, said a pricing sheet.

The bonds (/AA/A) were sold on a negotiated basis with Morgan Stanley & Co. Inc. as the senior manager.

The deal included series 2010A bonds and series 2010B bonds.

The 2010A bonds are due 2012 to 2030 with 2% to 5.3% coupons, all priced at par. The 2010B bonds are due 2012 to 2020 with term bonds due 2023 and 2031. The serials have coupons from 2.55% to 5.375%, all priced at par. The 2023 bonds have a 5.5% coupon, priced at par, and the 2031 bonds have a 5.7% coupon, also priced at par.

Proceeds will be used to fund educational loans.

Indianapolis Bond Bank bonds price

Elsewhere, the Indianapolis Local Public Improvement Bond Bank sold $195 million in series 2010A tax-exempt bonds and Build America Bonds, said a term sheet.

The bonds (Aa2/AA+/AA+) were sold through senior manager Citigroup Global Markets Inc. The co-lead manager for the 2010A-2 bonds was J.P. Morgan Securities Inc.

The offering included $40.8 million in series 2010A-1 bonds and $154.2 million in series 2010A-2 Build America Bonds.

The 2010A-1 bonds are due 2013 to 2022 with coupons from 3% to 5%. The 2010A-2 bonds are due 2030 and 2040. The 2030 bonds have a 5.854% coupon, priced at par, and the 2040 bonds have a 6.004% coupon, also priced at par.

Proceeds will be used to fund construction projects.

University Hospitals sale completed

In other news, the State of Ohio priced $92.75 million in series 2010 hospital revenue bonds for University Hospitals Health System Inc., said a pricing sheet.

The bonds (A2) were sold through senior managers Bank of America Merrill Lynch and Citigroup.

The bonds are due 2011 to 2027 with coupons from 2.25% to 5.25%.

Proceeds will be used to fund the construction, renovation, equipment and acquisition of hospital facilities and refund a portion of the health system's series 2008A-E bonds.

The health system is based in Cleveland.

Wisconsin brings $131.18 million

Also on Wednesday, the State of Wisconsin priced $131.175 million in series 2010 clean water revenue and refunding revenue bonds, according to a term sheet.

The sale included $67.415 million in series 2010-1 bonds, $14.07 million in series 2010-2 bonds and $49.69 million in series 2010-3 Build America Bonds.

The 2010-1 bonds are due 2012 to 2016 and 2026 to 2031 with coupons from 3% to 5%. The 2010-2 bonds are due 2019 to 2021 with 5% coupons across the board. The 2010-3 bonds are due 2017 to 2025 with 3.957% to 5.441% coupons, all priced at par.

Morgan Stanley was the lead manager.

Proceeds will be used to fund clean water initiatives and refund debt.

Massachusetts Bay bonds ahead

Out on the horizon, the Massachusetts Bay Transportation Authority plans to sell $121.04 million in series 2010 senior sales tax bonds, said a preliminary official statement.

The offering includes $80.005 million in series 2010A variable-rate demand obligations and $41.035 million in series 2010B bonds.

The bonds (Aa2/P-1/AAA/A-1/) will be sold on a negotiated basis with Citigroup and Ramirez & Co. as the senior managers.

The 2010A bonds are due 2030, and the 2010B bonds are due 2030.

Proceeds will be used to refund existing debt and terminate swap agreements.

The authority is based in Boston.

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