Munis improve but underperform rallying Treasuries; California brings $1.8 billion G.O. bonds

By Sheri Kasprzak

New York, March 13 - Municipals improved again on Thursday as the remainder of the week's primary offerings priced, market sources said. Also pushing yields down was a rallying Treasuries market, said a trader.

"We're getting a boost from Treasuries, but we're also seeing a lot of demand for new issues, and we're seeing yields repricing lower on a lot of these larger deals," a trader said in the afternoon.

Yields were seen lower by 3 basis points to 6 bps, better but still underperforming Treasuries, which got a boost from political unrest in the Ukraine. The potential Russian annexation of the Ukraine's Crimean Peninsula led investors to move toward safer investments, sparking a Treasury rally.

The 10-year Treasury note yield fell by 8 bps to close at 2.647%, and the 30-year bond yield fell by 7.5 bps to 3.591%. The five-year note yield fell by 6.5 bps to 1.52%.

California offers G.O. bonds

Heading up the day's primary action, the State of California sold $1,807,455,000 of series 2014 various purpose general obligation bonds.

The bonds (A1/A/A) were sold through joint bookrunners BofA Merrill Lynch and RBC Capital Markets LLC.

The deal included $1,012,675,000 of series 2014 G.O. bonds and $794.78 million of series 2014 G.O. refunding bonds, said a pricing sheet.

The 2014 G.O. bonds are due 2014 to 2030 with term bonds due in 2032 and 2043. The serial coupons range from 3% to 5% with yields from 0.07% to 3.69%. The 2032 bonds have a 4% coupon and priced at 97.931 to yield 4.16%. The 2043 bonds have a 4.5% coupon that priced at 99.669 to yield 4.52% and a 5% coupon that priced at 106.138 to yield 4.22%.

The 2014 G.O. refunding bonds are due 2014 to 2033 with coupons from 2% to 5% and yields form 0.07% to 4.21%.

Proceeds will be used to fund capital projects, repay commercial paper notes and current and advance refund existing G.O. debt.

Houston utility bonds price

Another billion-dollar offering came from the City of Houston, which offered up $1,300,965,000 of series 2014 combined utility system revenue refunding bonds.

The deal included $605,195,000 of series 2014B taxable first-lien bonds and $695.77 million of series 2014C tax-exempt first-lien bonds, said a pricing sheet.

The 2014B bonds are due 2015 to 2024 with a term bond due in 2028. The serial coupons range from 0.25% to 3.628% and all priced at par. The 2028 bonds have a 3.828% coupon and priced at par.

The 2014C bonds are due 2015 to 2028 with coupons from 2% to 5%.

The bonds (/AA/AA) were sold on a negotiated basis. J.P. Morgan Securities LLC was the senior manager for the 2014B bonds, and Siebert Brandford Shank & Co. LLC was the lead manager for the 2014C bonds.

Proceeds will be used to refund a portion of the city's series 2004A bonds.

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