Municipal yields close softer after busy session; Catholic Health brings $526.09 million bonds

By Sheri Kasprzak

New York, Oct. 13 - Municipals rounded out yet another day on a softer note as the market scrambled to absorb the recent flood of new offering, said market insiders.

As 20-year yields closed out the day up more than 18 bps and 15-year yields scooted up nearly 8 bps, traders were quick to point to the onslaught of primary action the market has endured over the past couple of days.

"I'm thinking it's supply pressure," said one trader of the softening trend munis have encountered over the past week.

"It's taking a while to absorb the supply. There does seem to be some new demand out there. I'm assuming things will become more stable in the next week."

Even though yields have been moving upwards for the past few sessions, Janney Montgomery Scott LLC managing director Alan Schankel said Thursday that the relationship to federal government debt continues to move lower.

"Despite these yield jumps, muni-to-Treasury ratios moved lower for a fourth day, although they remain well above 100% across the curve," Schankel wrote in a report.

Catholic Health brings deal

Heading up the day's heavy supply of new deals, Catholic Health Initiatives brought to market $526.09 million of series 2011 revenue bonds in two tranches Thursday, said pricing sheets.

The offering included $416.99 million of series 2011A bonds sold through the Colorado Health Facilities Authority and $109.1 million of series 2011A bonds sold through the Washington Health Care Facilities Authority.

The Colorado bonds are due 2013 to 2026 with term bonds due in 2031, 2033 and 2041. The serial coupons range from 2% to 5%. The 2031 bonds have a 5.25% coupon priced at 101.821. The 2033 bonds have a split maturity with a 4.875% coupon priced at 97.729 and a 5.25% coupon priced at 101.452. The 2041 bonds have a 5% coupon priced at 97.738.

The Washington bonds are due 2013 to 2019 and 2023 to 2025 with a term bond due in 2041. The serial coupons range from 2% to 5%. The 2041 bonds have a 5% coupon priced at 97.003.

The bonds (Aa2/AA/AA) were sold through J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

Proceeds will be used to construct, renovate and acquire facilities operated by Catholic Health.

California Public Works prices

In other major offerings, the California State Public Works Board sold $490.385 million of series 2011 tax-exempt lease revenue bonds in three tranches, said a pricing sheet.

The bonds were sold through Citigroup Global Markets Inc.

Retail investors, according to Tom Dresslar, spokesman for the state treasurer's office, snapped up $144.2 million, or 29.4%, of the offering.

The deal included $237.665 million of series 2011A various capital projects bonds (A2/BBB+/BBB+), $100.895 million of series 2011B California State University bonds (Aa3/BBB+/BBB+) and $151.825 million of series 2011C Department of Corrections and Rehabilitation bonds (A2/BBB+/BBB+).

The 2011A bonds are due 2013 to 2029 with a term bond due in 2031. The serial coupons range from 3% to 5.25%. The yields range from 1.25% to 5.22%. The 2031 bonds have a 5.125% coupon priced at 97.377 to yield 5.34%.

The 2011B bonds are due 2014 to 2031 with coupons from 3% to 5.25% and yields from 1.45% to 5.17%.

The 2011C bonds are due 2012 to 2028 with a term bond due in 2031. The serial coupons range from 3% to 5.25%. Yields range from 1.25% to 5.16%. The 2031 bonds have a 5.75% coupon priced at 103.911 to yield 5.24%.

Proceeds from the sale will be used to finance 10 construction projects, including five prison projects in San Luis Obispo, Vacaville, Sacramento, Corcoran and Stockton; two courthouses in Hollister and San Andreas; two California State University projects at San Diego and Stanislaus; and a Department of Development Services project at Porterville.

Tennessee offers $317 million

In other pricing news Thursday, the State of Tennessee priced $317.67 million of series 2011 general obligation bonds, said a pricing sheet. The deal was downsized from $361.055 million.

The offering included $255.4 million of series 2011A G.O. bonds and $62.27 million of series 2011B G.O. refunding bonds.

The 2011A bonds are due 2012 to 2031 with 2% to 5% coupons. The 2011B bonds are due 2012 to 2025 with 2% to 5% coupons.

The bonds (Aaa/AA+/AAA) were sold through Citigroup Global Markets Inc. and Barclays Capital Markets Inc.

The state, according to Mary-Margaret Collier, the state director of the Office of State and Local Finance, sold $231.445 million of G.O. bonds on the same date in 2010.

That deal was comprised of $186.505 million of series 2010A G.O. bonds and $44.94 million of series 2010B G.O. refunding bonds.

The G.O.s are due 2012 to 2031 with 3% to 4% coupons and the refunding bonds are due 2012 and 2019 to 2023 with 2% to 4% coupons.

Although Thursday's offering was conducted on a negotiated basis, the state sold its 2010 G.O.s competitively with Bank of America Merrill Lynch winning the 2010A bonds at a 3.05668% true interest cost and BMO Capital Markets LLC winning the 2010B bonds with a 2.738421% TIC.

Proceeds will be used to finance capital projects and refund commercial paper issued to fund previous capital projects.

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