Munis see some improvement in belly of curve; California gears up for $2 billion G.O. sale

By Sheri Kasprzak

New York, Oct. 17 - Municipals got a break on Monday after a rough couple of weeks. Yields, particularly in the intermediate portion of the yield curve, were seen firmer as the week got started, said market insiders.

Yields on seven-year municipals were down by about 2 basis points, and yields on 10-year bonds were seen down by more than 4 bps. The rest of the market was fairly subdued with yields down about a basis point or so, said a trader.

"We're catching a breather, basically, in volume. Last week, there was too much to absorb," said the trader.

He indicated that most of what priced last week has been doing well in secondary.

"It's just a matter of catching up," he noted.

The week ahead, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC, will be slightly more subdued in terms of volume. New deals are expected to total about $5 billion, he said in a report released Monday.

Heading up that volume is a $2 billion offering of series 2011 general obligation bonds from the State of California.

A retail order period was conducted for the offering on Monday, and another will take place on Tuesday. The bonds (A1/A-/A-) will be offered to institutional investors on Wednesday.

The deal includes $1.8 billion of series 2011 tax-exempt bonds and $200 million of series 2011 taxable bonds.

The bonds (A1/A-/) will be sold on a negotiated basis with Goldman Sachs & Co. as the senior manager for the offering.

Proceeds will be used to finance capital projects within the state and to refund certain outstanding G.O. bonds that have a mandatory tender date of April 2, 2012.

Hudson Yards preps $1 billion

The Hudson Yards Infrastructure Corp. out of New York will also offer a major deal during the week. On Wednesday, the corporation plans to sell $1 billion of series 2011 bonds through J.P. Morgan Securities LLC.

The proceeds from the deal will be used to pay for an extension of the Number 7 subway line from its current terminus at Eighth Avenue to the Hudson Yards Redevelopment Area. Proceeds will also fund other infrastructure needs, including park development and other amenities.

Pennsylvania plans G.O. sale

Another major deal for the week comes on Tuesday from the Commonwealth of Pennsylvania, which plans to price $825.765 million of series 2011 G.O. bonds, said a preliminary official statement.

The offering includes $650 million of first series of 2011 bonds and $175.765 million of first refunding series 2011 bonds.

The first series bonds are due 2012 to 2031, and the first refunding series bonds are due 2012 to 2022.

The bonds will be sold competitively with Public Financial Management Inc. as the financial adviser.

Proceeds will be used to fund the construction, acquisition and equipment of capital projects throughout the state; make grants and loans for various capital improvement projects, including water and sewage treatment facilities; and refund existing bonds.

Illinois to bring bonds

Looking ahead, the State of Illinois is set to bring $300 million of series 2011 sales tax revenue Build Illinois Bonds on Oct. 25.

The bonds will be sold competitively with Robert W. Baird & Co. Inc. as the financial adviser.

The bonds are due 2013 to 2036, and proceeds from the sale will be used to finance capital projects.

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