Primary market takes off; New Jersey Higher Education Student Assistance to sell $450 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, June 1 - June is already proving to be a busy month for municipals with billions of dollars planned for the first week of the month. A few substantial offerings lead the pack, but market insiders noted that the vast majority of the deals in the pipeline are smaller deals.

"It's a lot easier to sell several smaller bonds than it is to come out with an enormous offering," said one sellsider reached Monday afternoon.

"Investors just don't have the appetite for these huge deals anymore."

The municipal world also had its eyes on rising Treasury yields as the week began with a bullish tone on Wall Street.

"We're a little bit leery of it, but not so much so that we're pulling in our horns," a senior trader said.

"Treasuries have fallen sharply," he said, but each time they fell last week, "they came back a little."

"[With yields so high] I would think that there would be some give in munis," he said.

"High-yield spreads are coming in [and] they don't show any signs of giving."

On the investment-grade side, the trader said he is "more careful buying high grade because it tracks too closely to the market."

Apart from this week, the market does not have a great deal of supply, and if it is forthcoming, one trader said he hasn't seen it yet, but added that he would like to see a bit more.

Trends have been difficult to pinpoint, he said, as everyday there seems to be "another cross-current you have to worry about."

California needs to re-evaluate

Meanwhile, on the left coast, California may need to re-evaluate its debt issuance strategy to close up its gaping budget shortfalls, according to one sellsider.

"Fitch ... cut its outlook on the State of California to negative from stable, while affirming the state's A G.O. rating," Guy LeBas, chief fixed-income strategist for Janney Montgomery Scott LLC, said.

"Fitch cited 'revenue volatility' and 'fiscal inflexibility' imposed by requirements that voters weigh in on major tax and budgetary initiatives. More specifically, the propositions voted down on May 19 mean a forecasted $18.6 billion to $24.3 billion budget gap in fiscal 2010, with little improvement in subsequent years. That budget deficit may force the state to take on more aggressive measures than the already planned $13.2 billion in short-term note issuance, while the long-term nature of the imbalance is likely to require substantial additional G.O. debt issuance."

Tuesday deals

Meanwhile, Tuesday's active calendar will be led by a $450 million sale of series 2009A student loan revenue bonds from the New Jersey Higher Education Student Assistance Authority. Those bonds (/AA/A+) will be sold through lead manager Merrill Lynch & Co. Inc. and are due 2013 to 2030.

Proceeds will be used to fund student loans.

Also coming up on Tuesday is $351.18 million in series 2009 electric and gas system revenue bonds and Build America Bonds from the City of San Antonio. The bonds (Aa1/AA/AA+) will be sold for CPS Energy.

The bonds are coming to market through Goldman, Sachs & Co. The maturities range from 2026 to 2039, and proceeds will pay for capital improvements and the refunding of CPS Energy's series 1998A bonds.

In other Tuesday offerings, the Washington Area Metropolitan Transit Authority plans to price $310.21 million in series 2009 gross revenue transit bonds. Goldman Sachs will also price those bonds.

That sale includes $256.21 million in series 2009A bonds and $54 million in series 2009B Build America Bonds.

Proceeds will fund transit improvements.

Kansas school sale

In light pricing news from Monday, the Unified School District No. 457 in Kansas priced $90.21 million series 2009 general obligation refunding and improvement bonds (/A+/), according to a source familiar with the deal.

"It was received well," the source said, adding that yields were lower than expected.

Yields ranged from 1.59% to 4.22%.

The $63.2 million non-taxable bonds carry maturities from 2011 to 2024.

The $27.01 million taxable Build America Bonds were split into a $25.16 million bond due 2029 and a $38.04 million bond due 2034.

Piper Jaffray & Co. acted as lead underwriter for the negotiated deal.

Proceeds will be used to construct, improve, equip and renovate school facilities.

Unified School District No. 457 is located in Garden City, Kan.

New Hampshire HEFA bonds

In other upcoming sales for the week, the New Hampshire Health and Educational Facilities Authority plans to price $196.965 million in series 2009 private university revenue bonds for Dartmouth College Tuesday, said Dave Bliss with the authority.

The bonds (Aa1/AA+/) will be sold through lead manager Morgan Stanley & Co. Inc.

Proceeds will be used to construct a new life sciences building, renovate a residence hall and maintain Memorial Stadium.

The college is located in Hanover, N.H.

Elsewhere this week, the County of Nassau in New York plans to sell $190 million in series 2009A revenue anticipation notes on Thursday, according to a preliminary official statement.

The notes (A2/A+/A+/F1+) are due April 15, 2010.

The notes will be sold competitively with Public Financial Management Inc.

Proceeds will be used to pay for general expenses ahead of the collection of ad valorem taxes.

The county seat is Mineola, N.Y.

Harford County sale

Also this week, Harford County in Maryland is scheduled Tuesday to sell $147.73 million in series 2009 bonds, said a preliminary official statement.

The sale includes $120 million in series 2009 consolidated public improvement bonds and $27.73 million in series 2009 refunding bonds.

The bonds will be sold competitively with Public Advisory Consultants as the financial adviser.

The consolidated public improvement bonds are due 2010 to 2029, and the refunding bonds are due 2010 to 2020.

Proceeds will be used to fund capital improvement projects, including county general improvements and water and sewer improvements. The rest will be used to refund the county's series 1996, 1997 and 1999 G.O. bonds.

The county seat is Bel Air, Md.

Virginia deal coming

Moving a bit farther out, the Commonwealth of Virginia plans to price $133.89 million in series 2009 G.O. bonds on June 10, said a preliminary official statement.

The sale includes $125.225 million in series 2009A G.O.s and $8.665 million in series 2009B G.O.s.

The bonds will be sold competitively with Public Financial Management as the financial adviser.

The 2009A bonds are due 2010 to 2029, and the 2009B bonds are due 2021 to 2024.

Proceeds will be used to finance capital projects for educational, park and recreational facilities as well as to refund existing debt.

Michigan housing sale

Elsewhere, the Michigan State Housing Development Authority plans to price $288.345 million in series 2009 single-family mortgage revenue bonds, according to a preliminary official statement.

The sale includes $75.625 million in series 2009A non-AMT bonds, $27.71 million in series 2009B non-AMT bonds, $19.5 million in series 2009C AMT bonds, $61.09 million in series 2009C variable-rate non-AMT bonds and $104.42 million in series 2009D variable-rate non-AMT bonds.

Barclays Capital Inc. is the senior manager for the negotiated sale.

The 2009A serial bonds are due 2012 to 2019 with a term bond due 2022. The 2009B serial bonds are due 2010 to 2012. The 2009C serial bonds are due 2009 to 2010. The 2009C variable-rate bonds are due 2035, and the 2009D variable-rate bonds are due 2030.

Proceeds will be used to pay for mortgage loans.

Secondary improves

Coming off the weekend, municipal yields were seen better by 3 to 5 basis points across the yield curve, a trader said Monday afternoon.

"We're looking a lot better, all the way down the line," he said.

"Activity is kind of light today, but that's to be expected on a Monday. I suspect the whole week will be pretty quiet [in secondary], since there's so much going on in primary."

Looking at specific trades, the Eastern Michigan University's series 2009D Build America Bonds were in action. The 7.11% 2034 bonds were seen at 6.93%, and the 7.21% 2038s were seen trading at 6.9%

Elsewhere, the Wisconsin Health and Educational Facilities Authority saw its series 2009A revenue bonds for ThedaCare Inc. moving Monday. The 5.25% 2029 bonds were seen at 5.362%.

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