Municipals close mixed; Massachusetts School Building Authority upsizes deal to $1 billion

By Sheri Kasprzak

New York, Oct. 27 - Municipals once again closed mixed as Treasuries took a beating on Thursday. Still, one trader sees this as a good sign, considering the influx of volume and the weakness of Treasuries recently.

"We're not moving by that much, but we're getting pressure from new supply, and Treasuries are pulling us in places," he said.

"Given all the challenges we're facing this week, [munis] have performed well."

On Thursday, 15-year yields were seen higher by about 3 basis points. Five-year bonds were firmer by almost 2 bps, but shorter maturities were up by about 1 bp, said market insiders. Ten-year and 20-year yields were down about 1 bp, and 30-year yields were softer by about 2 bps.

"New issue supply can sometimes weigh on markets, but this week's relatively heavy slate offers enough diversity across states and structure to appeal to a wide variety of investors," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Schankel said Thursday that the supply just keeps pouring in. New offerings for the coming week could total about $7 billion, he noted.

Massachusetts deal upsized

Leading Thursday's offerings, the Massachusetts School Building Authority came to market with a significantly upsized deal. The authority priced $1 billion of series 2011B senior dedicated sales tax bonds, said a pricing sheet, upsized from $600 million.

The bonds are due 2012 to 2023 with term bonds due in 2027, 2032, 2035 and 2041. The serial coupons range from 2% to 5%. The 2027 bonds have a 5% coupon and priced at 112.689, and the 2032 bonds have a 5% coupon and priced at 108.14. The 2035 bonds have a split maturity with a 5% coupon priced at 107.037 and a 5.25% coupon priced at 110.434. The 2041 bonds have a 5% coupon and priced at 106.449.

Barclays Capital Inc., Bank of America Merrill Lynch and Citigroup Global Markets Inc. were the senior managers.

Proceeds will be used to fund grants to cities, towns and school districts for school construction and renovation projects.

Chicago Transit brings bonds

Also during the session, the Chicago Transit Authority sold $476.905 million of series 2011 sales tax receipts revenue bonds, said a pricing sheet.

The bonds (Aa3/AA/) were sold through Wells Fargo Securities LLC and Morgan Stanley & Co. LLC.

The bonds are due 2021 to 2031 with term bonds due in 2036 and 2040. The serial coupons range from 5% to 5.25%. The 2036 bonds have a 5.25% coupon and priced at 105.463, and the 2040 bonds have a 5.25% coupon and priced at 105.23.

Proceeds will be used to purchase rail cars and make other capital improvements approved by the authority's board.

Connecticut preps G.O. sale

Looking to upcoming offerings, the State of Connecticut announced plans Thursday to bring to market $715 million of series 2011 general obligation bonds.

The offering includes $550 million of series 2011D G.O. bonds and $165 million of series 2011E G.O. refunding bonds, said a preliminary official statement.

The bonds will be sold on a negotiated basis with J.P. Morgan Securities LLC as the lead manager.

The 2011D bonds are due 2012 to 2031, and the 2011E bonds are due 2012 to 2016 and 2019.

Proceeds will be used to fund capital projects and to refund the state's series 2001E bonds.

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