Munis firm by up to 10 bps; Sutter Health, Calif., brings $1.08 billion of upsized bonds early

By Sheri Kasprzak

New York, Jan. 25 - Municipal yields were improved across the yield curve on Tuesday, with long bonds better by as much as 10 basis points, said market insiders. The boost was enough to encourage one issuer to come to market early - and still upsize its sale.

"The long end is still seeing the most change," said one trader reached during the session.

"Out past 30 years, yields are down by about 10 [bps]. For the rest, anywhere from 3 to 8 [bps]."

The trader noted that a subdued primary calendar might be helping matters.

"There's not a lot of supply pressure going on right now, and also I think some investors are coming back. For a while there, things got scary, but the noise is dying down, and it's getting better."

It's not all roses for the market, however, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC. Kozlik noted Tuesday that Standard & Poor's could be making more downgrades as issuers struggle with budget difficulties.

Still, Kozlik feels overall credit quality in the market will remain strong.

"A majority of state and local government issuers rated by Standard & Poor's will likely remain medium to high investment grade," said a report released from S&P.

The rating agency downgraded 343 state and local governments in 2010, compared with 273 in 2009, Kozlik noted.

Sutter brings $1.08 billion

Meanwhile, market conditions improved enough Tuesday for Sutter Health of California to come to market a day early with its $1.075 billion sale of series 2011 revenue bonds. The offering was upsized from $900 million.

The sale included $325 million of series 2011A bonds sold through the California Statewide Communities Development Authority and $750 million of series 2011B bonds sold through the California Health Facilities Financing Authority.

The 2011A bonds are due 2016 to 2024 with term bonds due 2026 and 2042. Serial coupons range from 4% to 6%. The 2011B bonds are due 2016 to 2024 with term bonds due 2026, 2031 and 2042. Serial coupons range from 4% to 6%.

Morgan Stanley & Co. Inc. was the senior manager.

Proceeds will be used to finance the Sacramento-based health-care system's ongoing capital plan and refund existing debt.

Fairfax sells bonds

Also during the light pricing session on Tuesday, Fairfax County in Virginia hit the competitive market with $192.02 million of series 2011A public improvement and refunding bonds, said a pricing sheet.

J.P. Morgan Securities LLC won the bid for the bonds (Aaa//AAA) with a 3.71% true interest cost.

The bonds are due 2012 to 2031 with coupons from 2% to 5%.

Proceeds will be used to fund improvements to school facilities, transportation systems and park and recreation facilities as well as refund existing debt.

The county seat is Fairfax, Va.

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