Muni investors are seeking bids, Janney's Schankel says; Harris County Flood District to sell

By Sheri Kasprzak

New York, Aug. 27 - Municipal yields closed out another wild week with gains for the first time in August. Meanwhile, investors are looking for bids, said Janney Montgomery Scott LLC managing director Alan Schankel.

"Our trading desk saw significant volumes of investors seeking bids, apparently looking to lock in profits from the sharp bond rally of recent weeks," Schankel said.

"Of course, not all bids were a hit, but there is a sense that the market may be in for a correction, especially in shorter maturities where benchmark yields are below 2% for maturities out to eight years. For the week ending Aug. 18, tax-free mutual fund inflows were strong at $1.38 billion, the third consecutive week above $1 billion, even as equity funds continued to see strong outflows.

"Next week will be slow, with no large issues scheduled. The 30-day visible supply is at $5.5 billion, the lowest level since March. Low supply through the holiday could put a damper on any market correction."

Treasuries took a hit Friday on a statement from Federal Reserve chairman Ben Bernanke that the Fed would look into some unorthodox measures to fix the troubled economy. Municipals followed those losses with triple A-rated 20-year munis seen up 2 basis points at 3.32%. Thirty-year triple-A bonds were also up 2 bps on the session.

Harris flood deal ahead

Looking to offerings in the quiet week ahead, the Harris County Flood District in Texas is set to price $205 million in series 2010A contract tax refunding bonds on Tuesday, said a calendar of upcoming deals.

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

Proceeds will be used to refund and defease all of the district's outstanding commercial paper notes.

The district is based in Houston.

Tennessee school bonds set

Also ahead, the Tennessee State School Bond Authority is expected to bring to market $245.055 million in series 2010 higher educational facilities second program bonds Wednesday, said a preliminary official statement.

The bonds (Aa1//AA+) will be sold competitively with Public Financial Management Inc. as the financial adviser.

The offering includes $226.925 million in series 2010A tax-exempt bonds and $18.13 million in series 2010B taxable bonds.

Both the 2010A bonds and 2010B bonds are due 2011 to 2040.

Proceeds will be used to retire commercial paper from the University of Tennessee at Knoxville, University of Tennessee at Martin, Middle Tennessee State University, University of Memphis and Tennessee Technological University.

Located in Nashville, the authority provides funding for a variety of school facilities.

Minnesota preps sale

Out on the horizon, the State of Minnesota is set to sell $899.68 million in series 2010 general obligation state bonds on Sept. 7, said a preliminary official statement.

The offering includes $681.2 million in series 2010D various-purpose refunding bonds and $218.48 million in series 2010E state trunk highway refunding bonds.

The bonds (Aa1/AAA/AAA) will be sold on a negotiated basis with RBC Capital Markets Corp. as the lead manager.

Both series of bonds are due 2011 to 2024.

Proceeds will be used to refund existing debt.

U of South Carolina prices

During the light primary action Friday, the University of South Carolina sold $78.695 million in series 2010 athletic facilities revenue bonds, said a pricing sheet.

The sale included $65.855 million in series 2010A bonds and $12.84 million in series 2010B refunding bonds.

The bonds (Aa3) were sold through Barclays Capital Inc.

The 2010A bonds are due 2011 to 2030 with term bonds due 2035 and 2040. The serial coupons range from 3% to 5%. The 2035 bonds have a 5% coupon priced at 107.179, and the 2040 bonds have a 5% coupon priced at 106.932.

The 2010B bonds are due 2011 to 2027 with coupons from 3% to 5%.

Proceeds will be used to construct, renovate and equip athletic facilities, garage and maintenance facilities, a coaches' support facility and spring sports venues at the university as well as refund the university's series 2002 bonds.

The university is located in Columbia, S.C.

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