Muni yields seen firmer amid light trading; Pennsylvania Turnpike sells $600 million in bonds

By Sheri Kasprzak

New York, Aug. 31 - Municipal yields were unchanged to slightly firmer on Tuesday as trading activity remained light, a market insider reported.

"There's nothing trading today," he said.

"Yields are maybe a touch better here and there, but only a basis point or so. The long bonds are flat. It's probably going to stay this way all until after the holiday."

Meanwhile, primary action was led by a $600 million sale of Build America Bonds from the Pennsylvania Turnpike Commission.

The offering drew more than 40 institutional investors, said Nick Grieshaber, the commission's chief financial officer, in an interview Tuesday afternoon.

"It's the largest [deal], and we're one of the few issuing this week," he said.

The net interest cost of the deal was around 3.6%, said Grieshaber, and he said for 40-year debt, the commission is "quite pleased with the results."

The bonds (Aa3/A+/) were sold through Bank of America Merrill Lynch and are due Dec. 1, 2045 and Dec. 1, 2049. The 2045 bonds have a 5.511% coupon priced at par, and the 2049 bonds have a 5.561% coupon, also priced at par.

For comparison's sake, the commission sold $275 million of Build America Bonds in July 2009. Those bonds, which are due Dec. 1, 2039, priced at par with a 6.105% coupon. Grieshaber said that after the subsidy, the NIC for the July 2009 bonds came in just under 4%.

"This [Tuesday's sale] is even lower, so we did well," he noted.

In reoffering action, the 2045 bonds were seen trading at 5.504% and the 2049s were seen at 5.554% in the late afternoon.

Proceeds from the sale will be used to fund the commission's 10-year capital program, including the reconstruction of 70 miles of state highway.

Harris flood bonds price

In other primary news, the Harris County Flood Control District sold $183.2 million in series 2010A contract tax refunding bonds, said a pricing sheet. The offering was downsized from $205 million.

The bonds (/AAA/AAA) were sold on a negotiated basis with Goldman, Sachs & Co. and Piper Jaffray & Co. as the lead managers.

The bonds are due 2024 to 2030 with term bonds due 2034 and 2039. All of the bonds have 5% coupons. The 2034 bonds priced at 109.486, and the 2039 bonds priced at 108.706.

The Houston-based district will use the proceeds to refund and defease all of its outstanding commercial paper notes.

N.Y. Mortgage sells

Elsewhere, the New York Mortgage Agency brought to market $72.9 million in mortgage revenue bonds in four tranches, said a term sheet.

The bonds were sold through Morgan Stanley & Co. Inc.

The deal included $14.8 million in 41st series non-AMT bonds, $5.2 million in 42nd series non-AMT bonds, $14.3 million in 43rd series non-AMT bonds and $38.6 million in 44th series AMT bonds.

The 41st series bonds are due 2011 to 2022 with term bonds due 2025 and 2028. The serial coupons range from 0.4% to 3.2%, all priced at par. The 2025 bonds have a 3.625% coupon priced at par, and the 2028 bonds have a 4% coupon, also priced at par.

The 42nd series bonds are due 2011 to 2018 with coupons from 0.4% to 2.5%, all priced at par.

The 43rd series bonds are due 2011 to 2015 and 2017. The coupons range from 0.4% to 2.3%, all priced at par.

The 44th series bonds are due 2011 to 2014 and 2018 to 2024. The coupons range from 1.15% to 4.35%, all priced at par.

Proceeds will be used to finance mortgage loans.

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