'Bloody' day in munis; American Municipal Power sells $1.1 billion of Build America Bonds

By Cristal Cody

Tupelo, Miss., Dec. 14 - Municipal yields logged another bad day as Treasury yields rose, a source said.

"It's down a lot. It was a bad day," the source said.

Benchmark bonds are down in longer maturities by 10 basis points to 15 bps, and the shorter end was down 5 bps to 10 bps, the source said.

Treasuries fell after the Federal Reserve's statement on Tuesday indicated no plans to ease up on the $600 billion debt buyback program known as quantitative easing.

The 10-year Treasury note yield has risen nearly 90 bps since the Federal Reserve met on Nov. 3, when it closed at 2.57%. The yield on the 10-year benchmark note ended the day at 3.46% on Tuesday, up from 3.27% on Monday.

Meanwhile, the rise in Build America Bonds is placing pressure on the market.

"There's a lot of BAB supply because it ends Dec. 31 and a lot of issuers are trying to squeeze issues in - it's getting a little bloody out there," a source said.

American Municipal prices

The biggest deal of the day was from American Municipal Power Inc., which sold $1.1 billion of Build America Bonds, an informed source said.

"It was Build America Bonds all the way," the source said.

American Municipal Power sold the series 2010B Build America Bonds (A3/A/A) to yield 3.3% in the 2041 maturity.

The final pricing terms have not been released.

BMO Capital Markets Corp. was the lead manager of the negotiated sale.

Proceeds will be combined with the proceeds from series 2010A-D revenue bonds and used to fund the construction of the Meldahl hydroelectric project, fund required reserves and capitalize interest through construction.

American Municipal Power is a Columbus, Ohio-based non-profit wholesale power and energy distributor.

Another sale of Build America Bonds is expected on Wednesday. The Commonwealth of Pennsylvania plans to sell $650 million of general obligation bonds, including $466.605 million of Build America Bonds.

St. Charles Parish to sell

Meanwhile, a new offering was announced by the Parish of St. Charles in Louisiana. The parish intends to price $300 million of Gulf Opportunity Zone revenue bonds for Valero Refining-New Orleans LLC, according to a preliminary official statement.

The series 2010 bonds (/A+/) are due Dec. 1, 2040 and are subject to a mandatory tender on Feb. 2, 2011.

Suntrust Robinson Humphrey will manage the negotiated sale.

Proceeds will be loaned to Valero Refining to finance the cost to acquire, construct and install an expansion to the company's existing refinery in the parish.

The parish seat is Hahnville, La.

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