Yields close out Monday weaker; Dasny reportedly sells $1.36 billion; market preps for deluge

By Sheri Kasprzak

New York, Oct. 4 - Municipal yields continued to weaken to kick off another supply-heavy week, market insiders reported.

"Yields are up anywhere from 2 to 4 basis points across the curve," said one trader reached in the afternoon.

"On the whole, I think the market is still trying to get through this overload of supply."

Meanwhile, the market was prepping itself for the glut of sales expected in the coming week.

On Monday, the Dormitory Authority of the State of New York reportedly sold to institutional investors $1.363 billion in series 2010 state personal income tax revenue bonds.

The full details of the offering were unavailable Monday afternoon, and calls to Dasny for comment on the deal were not immediately returned.

The sale includes $554.515 million in series 2010E tax-exempt bonds, $61.275 million in series 2010F tax-exempt bonds, $149.5 million in series 2010G federally taxable bonds and $597.91 million in series 2010H Build America Bonds.

The 2010E bonds are due 2012 to 2030 with term bonds due 2035 and 2040. The 2010F bonds are due 2011 to 2030 with a term bond due 2035. The coupons for both series reportedly range from 2% to 5%.

None of the pricing terms for the 2010G and 2010H bonds were available Monday.

M.R. Beal & Co. and Bank of America Merrill Lynch managed the 2010E and 2010F bonds, while Bank of America and Siebert Brandford Shank & Co. LLC brought the 2010G and 2010H bonds.

Proceeds will be used to fund capital projects at the State University of New York and the City University of New York as well as fund economic development grants under a variety of state-run projects.

Pennsylvania TANs ahead

Heading up Tuesday's big competitive calendar is a $1 billion offering of tax anticipation notes from the Commonwealth of Pennsylvania.

Rick Dreher, the commonwealth's director of revenue, capital and debt, told Prospect News in an earlier interview that Pennsylvania is required by law to sell its debt competitively.

The timing of the debt has more to do with the commonwealth's need for capital than the current market conditions, Dreher said.

The notes are due June 30, 2011, and proceeds will provide cash for the commonwealth's general fund for payroll and other operating costs.

Metropolitan Pier bonds to price

Another billion-dollar sale is looming, this one from the Metropolitan Pier and Exposition Authority of Illinois. The authority's $1.178 billion sale of McCormick Place Expansion Projects bonds (A2//AA-) could come to market as early as Tuesday, said one sellsider.

The bonds will be sold through Morgan Stanley & Co. Inc. and Goldman, Sachs & Co. with Cabrera Capital Markets LLC and Loop Capital Markets LLC as the co-senior managers.

The offering is comprised of $204.37 million in series 2010A bonds, $940.6 million in series 2010B refunding bonds and $33.22 million in series 2010C refunding bonds.

This will be the first time since 2004 that the authority has come to market with an issue, and this could help the pricing, said the sellsider familiar with the deal.

"They're not always in the market. It's a fairly unique issue," he said.

"It's a decent credit, and I expect that yields will be extremely favorable."

The authority is based in Chicago.

L.A. sets offering

Looking out on the horizon, the City of Los Angeles is expected to sell $450.735 million in series 2010 wastewater system revenue bonds, said a preliminary official statement.

The offering includes $186.735 million in series 2010A senior-lien Build America Bonds (Aa2/AA/AA+), $80 million in senior-lien taxable recovery zone economic development bonds (Aa2/AA/AA+) and $184 million in series 2010A subordinated tax-exempt bonds (Aa3/AA-/AA).

The bonds will be sold on a negotiated basis. Siebert Brandford Shank is the lead bookrunner for the senior-lien bonds, and Cabrera Capital Markets is the lead bookrunner for the subordinated bonds.

Proceeds will be used to fund improvements to the city's wastewater system as well as refund existing commercial paper notes. The remainder will be used to fund a debt service reserve fund.

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