Trading slackens in short session; investors keep after higher yields

By Aaron Hochman-Zimmerman and Cristal Cody

New York, Feb. 13 - The municipal marketplace spent a quiet week watching Washington, D.C., and pricing a limited number of issues.

Friday's action was unsurprisingly quiet, but investors were able to take the opportunity to evaluate where the extremely volatile market has landed.

"[I saw] more flattening of the curve, without question," a trader said.

Accounts favored the long-term paper, he said. "The five- to 15-year range has met with some selling."

There had been more excitement at the beginning of the week, but the shortened session and three-day weekend have "tempered the interest in the bidding," he said. "The bidding was kind of thin."

When issues have priced with a dollar price of 109 or 110, in the days following "the market was not paying for it," he said.

"That doesn't mean there will be follow-through on that on Tuesday," he added.

People "are tired today," he said on Friday after the close.

There has been "good interest on the long end" with "good underlying bids," he said.

The trader has seen most interest from retail and institutional accounts go to higher yielding products such as "some of the hospitals," he said.

The bonds from Montgomery County, Ohio, and Washington Healthcare Facilities Authority showed strong upside, he said.

The very high-grade paper attracted the second most interest, he said.

Accounts had little use for the mid-range but focused either on very safe high-grade paper or very rewarding high-yield paper.

Both are "highly liquid" and "people feel comfortable with that," he said.

Washington Healthcare terms

Washington Healthcare Facilities Authority/Multicare in Washington released the terms from Wednesday's deal.

The authority priced $100 million in 2009A and 2009B revenue bonds on Wednesday, according to a source familiar with the deal.

The two equal tranches carry serial maturities from 2009 to 2019 with term bonds due 2019, 2024, 2029 and 2039.

The yields ranged from 2.22% to 6.08%.

Merrill Lynch & Co. acted as lead bookrunner for the negotiated deal.

Proceeds will be used to fund hospital expansion and maintenance.

The Washington Healthcare Facilities Authority is based in Olympia, Wash.

"It went well" with "very good demand in the longer maturities," the source said.

Interest came from "a wide variety of investors, including retail ... and mutual funds," he said.

Some doubts

Some may feel as though issuance is in trouble because "we've come so far so fast," in terms of Treasury yields, he said.

The truth is "we've outperformed all parts of the curve," he said. "Supply and demand dynamics have been very good" with retail leading in demand.

Florida to price $140 million

The Florida Department of Management Services intends to sell $140 million in certificates of participation during the upcoming week.

The COPs may be sold on a competitive or negotiated basis.

If the COPs are sold through a competitive sale, the first date they may be sold is Tuesday, the state's bond division said.

Florida typically sells bonds on a competitive basis with an 18-hour notice.

Two from the heartland

The Unified Government of Wyandotte County and Kansas City, Kan., expects to price $106.085 million in general obligation bonds and temporary notes on March 5.

The sale includes $24.24 million series 2009A and $1.185 million series 2009B G.O. improvement bonds and $7.08 million series 2009III, $73.28 million series 2009IV and $300,000 series 2009V municipal temporary notes.

The bonds and notes will be sold through competitive sales with Springsted Inc. as the financial adviser.

The bonds have serial maturities from 2010 through 2029, and the notes are due in 2010.

Elsewhere in the Midwest, Hendricks Regional Health expects to sell $75 million lease revenue bonds through the Indiana Bond Bank on Feb. 25.

The series 2009A bonds (/AA/) have serial maturities from Aug. 1, 2009 through Aug. 1, 2023 and a term bond due 2029, according to the preliminary official statement.

RBC Capital Markets will be the senior manager of the negotiated sale. Raymond James and Melvin & Co. are co-managers.

Proceeds will be used to expand the hospital and add new operating rooms and to fund the reserve requirement of the debt service reserve fund, said Gary Simpson, controller for Hendricks Regional Health.

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