Munis close mixed as investors become wary; Maryland brings $440.69 million of G.O. bonds

By Sheri Kasprzak

New York, July 27 - As the market waited to see whether the U.S. government will default on its debt next week, munis were unstable and yields were seen mixed, traders said Wednesday.

Short yields were seen firmer, and long bonds were seen slightly weaker.

Alan Schankel, managing director with Janney Montgomery Scott LLC, said Wednesday that the market lacks direction because of the budget impasse in Washington.

"A relatively firm Treasury market supported munis on Tuesday, leaving benchmark yields little changed, but a light new-issue calendar and the wait-and-see secondary market offered little guidance," he wrote.

"Concerns about the impact of federal budget cuts on municipal issuer ratings are generating uncertainty, with reports from both Moody's [Investors Service] and [Standard & Poor's] suggesting potential downgrades ahead."

Maryland deal sets tone

A large offering from the State of Maryland set the tone for the day, said Schankel. The state priced $440.685 million of second series 2011 state and local facilities general obligation bonds (Aaa/AAA/AAA).

The bonds were sold competitively with Bank of America Merrill Lynch winning the bid.

The offering included $418.27 million of series 2011B bonds, $15.9 million of series 2011C bonds and $6.515 million of series 2011D bonds.

The 2011B bonds are due 2014 to 2026 with 3% to 5% coupons. The 2011C bonds are due 2026 and have a 4.15% coupon priced at par. The 2011D bonds are due 2026 with a 4.2% coupon priced at 100.22.

Proceeds will be used to fund capital projects.

Montgomery County preps deal

Looking ahead, another deal out of Maryland is in the works. Montgomery County plans to price $579.41 million of series 2011 consolidated public improvement G.O. bonds on Aug. 3, said a notice of sale.

The bonds (Aaa/AAA/AAA) will be sold competitively with Public Financial Management Inc. as the financial adviser.

The offering includes $320 million of series 2011A consolidated improvement bonds and $259.41 million of series 2011B consolidated improvement refunding bonds.

The 2011A bonds are due 2012 to 2031. The 2011B bonds are due 2012 to 2023.

Proceeds will be used to refinance all or a portion of the county's outstanding bond anticipation notes and to refund some of the county's existing G.O. bonds.

Community Memorial deal ahead

Coming up on Thursday, the City of San Buenaventura, Calif., plans to bring $345.9 million of series 2011 revenue bonds through Bank of America Merrill Lynch.

The bonds (Ba2/BB/) are due 2016 to 2021 with term bonds due in 2026, 2031 and 2041.

Proceeds will be used to upgrade, expand and modernize Community Memorial Health facilities, including installing seismic safety measures.

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