Howard County, Md. releases terms on refunding deal; secondary market little changed ahead of jobs data

By Paul A. Harris and Sheri Kasprzak

New York, Dec. 6 - Howard County, Md., finalized terms on a $104 million refunding deal (Aaa/AAA/AAA) on Wednesday via Bear Stearns.

The deal included slightly more than $87 million of 4¼% consolidated public improvement general obligation bonds due 2019, with a maximum yield of 3.85%, and a serial structure ranging from 2009 to 2019.

The refunding also included $11.9 million of 4 3/8% Metropolitan District general obligation bonds due 2029, with a maximum yield of 4.46%, with a serial structure running between 2009 and 2022, with term bonds maturing in 2025 and 2029.

Sharon Greisz, Howard County director of finance, told Prospect News that the refunding deal achieved a net savings of 4.9%.

"We usually looked at refundings when we're at the 3.0% level, so it was a fantastic refunding," Greisz said.

"With current IRS regulations on tax-exempt debt you can only do advance refunding once."

Greisz said that there was little advance refunding in the new deal.

"The majority was current, meaning that we're going to call the debt on Feb. 15.

"Most of this was a refunding of a refunding, which you usually can't do with tax-exempt debt.

"It was a really narrow window to hit the market with this."

MBIA at the forefront

A sell-side source told Prospect News that the market is presently focused on Wednesday's announcement from Moody's Investors Service that MBIA Inc.'s financial health may be weaker than had been apparent to ratings agencies a fortnight ago, rendering the eventuality of a downgrade "somewhat likely."

A decision is expected within two weeks.

People are taking a closer look at underlying credits, and are poised to wait for a couple of weeks until there is visibility on what Moody's will do in this situation, the sell-sider said.

The official added that the Treasury curve was off top-to-bottom on Thursday, with the short end selling off a little more.

The MMD curve was also off, top to bottom, from one to three basis points points, the source added, noting that the municipals market was nominally off on Thursday.

Upcoming offerings

Coming up, Suffolk County, N.Y., plans to price $300 million in tax anticipation notes - 2008 series I. Those notes, due Aug. 14, 2008, are set to price Dec. 13 and will settle on Jan. 3, 2008.

Elsewhere, one market source said Thursday the he didn't see much coming up but had noticed an issue of $225 million in Indianapolis Bond Bank notes, to be sold through the tax-anticipation warrant program, due 2009. The TAW program pools the needs of multiple borrowers into one issue of notes. The notes, the source said, will price Dec. 18.

"I haven't heard any price talk on them," he said.

Secondary remains quiet

In the secondary market, insiders said they were all sitting around, anticipating word from the Fed on interest rates and the non-farm payrolls figure from the Bureau of Labor Statistics on Friday morning.

"In the general market right now, we're sitting here in muni-land waiting for tomorrow's unemployment numbers," said one trader.

The trader said that things were pretty much unchanged in the market on Thursday.

"We've been a bit cheap compared to Treasuries," he added. "We're at about 100% of Treasuries when historically we're at 80% to 85% [of Treasuries], so munis have a little bit of insulation right now."

In terms of actual trades, one trader said there weren't any large trades on Thursday.

"There were a few small retail-type trades, no real flow of block-sized trading," he said. "New issues are normally a good barometer of the market. Things are getting done at a little wider spread than normal because people who bring issues want to get them out the door with all the upcoming news."

Interest rates may impact market

Another trader said he wasn't seeing much going on Thursday either.

"There really isn't much to report," he said Thursday afternoon. "I think we're just waiting on data tomorrow [Friday] so it will be interesting to see how the market responds. I really don't have any idea how they [the numbers] will affect trading."

A trader said Thursday that there has been talk that the Fed will cut interest rates - but the size of the cut has been debated.

"Some people are saying 25 bps, some people are saying 50 bps," he said. "It will be interesting to see how it will affect the market."

All in all, traders seemed to agree that the secondary market Thursday was probably a little cheaper than normal as the market awaits Friday's data.

The BLS is expected to report Friday that 80,000 jobs were created in November, almost half of the number of jobs created in October.

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