Munis end slightly firmer as retail gobbles up deals; California brings $2.39 billion bonds

By Sheri Kasprzak

New York, Sept. 20 - Municipals rounded out the session on a slightly firmer note as investors scooped up offerings from a healthy primary calendar, said market insiders. The State of California dominated the market action with its $2.392 billion sale of general obligation bonds.

"I'd call it a touch firmer," said one trader reached during the day. "[Yields are] a basis point lower here and there."

Retail investors this week have been lured to market by a few major offerings, including the California deal. Alan Schankel, managing director with Janney Montgomery Scott LLC, said Tuesday that the new-issue slate for this week includes over $8 billion of new bonds. Visible supply is at $12.9 billion, the highest level of the year.

A dearth of California G.O. deals so far this year stimulated investor demand for the state's new issue, Schankel said

Tom Dresslar, spokesman for the state treasurer's office, said the offering included $2.367 billion of tax-exempt bonds and $25 million of taxable bonds. Retail investors were not offered the taxables. They purchased $654.95 million of the tax-exempts, comprising 27.7% of that offering, Dresslar said.

Bonds yield 0.72% to 4.8%

The tax-exempts are due 2013 to 2041 with 3% to 5.25% coupons and yields from 0.72% to 4.8%. The taxable bonds are due in 2013 and have a 1.5% coupon to yield 1.034%, or 88 basis points over two-year Treasuries, Dresslar noted.

Bank of America Merrill Lynch and Stone & Youngberg LLC were the lead managers for the bonds (A1/A-/A-).

Proceeds will be used to retire outstanding commercial paper notes and refund existing debt.

Dresslar said the yield for the five-year 2011 bonds is 1.61%, compared with 2.66% for the state's 2010 G.O. offering. The yield for the 10-year maturities is 3.17%, compared with 4.23% in 2010, and the yields for the 20-year maturities are 4.45% and 4.57%, compared with 5.28%. The 20-year bonds have a split maturity. The 30-year bonds' yield is 4.8%, compared with 5.5% for the 2010 issue.

"This is an outstanding result for taxpayers," California treasurer Bill Lockyer said in a statement. "We aggressively priced this deal for them from the start, and it paid off.

"We're also very pleased with the retail demand. The market is not very conducive to doing a bang-up retail business. And given the fact that we didn't offer several maturities to retail, we're happy with the results."

Florida DEP prices

Elsewhere during the session, the Florida Department of Environmental Protection brought to market $169.945 million of series 2011B Florida Forever revenue refunding bonds, said a pricing sheet.

The bonds (A1/AA-/A) were sold competitively with J.P. Morgan Securities LLC winning the bid.

The bonds are due 2013 to 2022 with 4% to 5% coupons. The 2017 and 2022 bonds were not reoffered.

Proceeds will be used to refund the state's series 2002A-B Florida Forever revenue bonds.

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