Munis end firmer; Dasny prices $909.43 million PITs, yields drop 4-8 bps from retail orders

By Sheri Kasprzak

New York, July 14 - Municipal yields closed out Thursday firmer yet again. Yields were down 1 basis point to 4 bps across the curve. The 30-year bond yield saw the most improvement, dropping by more than 4 bps, said traders.

One possible factor driving the market was the pricing of a major deal for the week: a $909.425 million sale of state personal income tax revenue bonds from the Dormitory Authority of the State of New York.

With volatility in Treasuries and retail skepticism of lower-rated munis, higher-rated municipals like the New York deal are valuable, said one trader. Moody's Investors Service announced Wednesday that it might downgrade U.S. government bonds, which has led to a flight to quality for investors, said one trader reached Thursday afternoon.

"There's certainly a bigger demand for high-quality [munis] right now," said the trader.

"The New York deal went well, and that could be pushing us a bit."

The Dasny offering - which included $864.79 million of series 2011C tax-exempts and $44.635 million of series 2011D taxable bonds - was upsized from $762.715 million.

Yields drop 4-8 bps

The deal, according to Alan Schankel, managing director with Janney Montgomery Scott LLC, experienced strong demand, which enabled the underwriters, led by Wells Fargo Securities LLC and Barclays Capital Inc., to hit the institutional order period with yields 4 bps to 8 bps lower than the retail order period.

The 2011C bonds are due 2014 to 2031 with term bonds due in 2034 and 2041. The serial coupons came in between 3% to 5%. The 2034 bonds have a 5% coupon priced at 107.494, and the 2041 bonds have a 5% coupon priced at 105.594.

The 2011D bonds are due 2012 to 2014 with 0.39% to 1.128% coupons, all priced at par.

The authority intends to use the proceeds from the deal to finance capital projects at the State University of New York and to fund grants under the Expanding Our Children's Education and Learning program.

Honolulu brings G.O. bonds

Elsewhere during the session, the City and County of Honolulu, Hawaii, sold $305.675 million of series 2011 general obligation bonds, said a pricing sheet.

The bonds (Aa1//AA+) were sold through Bank of America Merrill Lynch and Piper Jaffray & Co.

The offering included $141.23 million of series 2011A bonds and $164.445 million of series 2011B bonds.

The 2011A bonds are due 2016 to 2036 with 4% to 5.25% coupons. The 2011B bonds are due 2016 to 2027 with 2% to 5% coupons.

Proceeds will be used to fund capital improvement projects and to refund the city's series 1993A-C, 1994A, 2001A, 2003A, 2004A, 2005A and 2007A bonds.

Fairfax authority sells

Also on Thursday, the Fairfax County Economic Development Authority of Virginia came to market with $99.43 million of series 2011 Wiehle Avenue Metrorail Station Parking project revenue bonds, said a pricing sheet.

The bonds (Aa2/AA+/) were sold competitively.

The bonds are due 2015 to 2032 with a term bond due in 2034. The serial coupons range from 2% to 5%. The 2034 bonds have a 4.5% coupon priced at 98.

Proceeds will be used to finance or reimburse the county for the costs of constructing a parking area in Reston, Va., for the Dulles Corridor of the Washington Area Metropolitan Transit Authority's Metrorail system.

Chicago water sale ahead

Looking to upcoming offerings, the Metropolitan Water Reclamation District of Greater Chicago is set to price $400 million of series 2011 G.O. capital improvement bonds, said a preliminary official statement.

The deal includes $30 million of series 2011A limited tax taxable G.O. capital improvement bonds, $270 million of series 2011B limited tax G.O. capital improvement bonds and $100 million of series 2011C unlimited tax G.O. capital improvement bonds.

The bonds (Aaa/AAA/AAA) will be sold on a negotiated basis with J.P. Morgan Securities LLC and Citigroup Global Markets Inc. as the lead managers.

The 2011A bonds are due 2013 to 2016, and the 2011B bonds are due 2016 to 2031. The 2011C bonds are due 2028 to 2033 with a term bond due Dec. 1, 2038.

Proceeds will be used to construct, complete, replace, renovate and repair sewage treatment works, water quality improvement projects and flood control facilities within the district.

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