Muni yields firm as new issues arrive; State Building Authority, Mich., brings $648.94 million

By Sheri Kasprzak

New York, July 12 - Municipal yields dropped on Tuesday as the market took on a huge supply of new offerings, traders reported.

Yields were lower by 1 basis point to 7 bps across the curve, with the five-year yield seen down 7 bps. The seven-year muni bond was down 4 bps, and the 10-year was down 3 bps.

"[The] response to the new issues has been good, so that seems to be driving the market today," said one trader.

"New issues are getting good pricing. Secondary is also doing better than usual."

Those new deals were led by Michigan's State Building Authority, which brought $648.94 million of series 2011 revenue and revenue refunding bonds, said a pricing sheet.

Bonds price in four tranches

The offering included $409.55 million of series 2011I-A facilities program revenue and refunding bonds, $180.7 million of series 2011II-A facilities program revenue and revenue refunding bonds, $12.195 million of series 2011I-B federally taxable facilities program revenue bonds and $46.495 million of series 2011II-B variable-rate facilities program revenue refunding bonds.

The 2011I-A bonds are due 2011 to 2031 with term bonds due in 2036, 2041 and 2045. The serial coupons range from 2% to 5.2%. The 2036 bonds have a 5.37% coupon priced at 98.969, and the 2041 bonds have a 5.375% coupon priced at 98.159. The 2045 bonds have a 5.5% coupon priced at 98.775.

The 2011II-A bonds are due 2011 to 2031 with term bonds due in 2036 and 2041. The serial coupons range from 2% to 5.2%. The 2036 bonds have a split maturity with a 5.25% coupon priced at 99.3 and a 5.375% coupon priced at 98.969. The 2041 bonds have a 5.375% coupon priced at 98.159.

The 2011I-B bonds are due 2012 to 2021 with a term bond due in 2031. The serial coupons range from 1.149% to 4.594%, all priced at par. The 2031 bonds have a 6.165% coupon priced at par.

The 2011II-B bonds are due Oct. 15, 2042 and bear interest at the initial rate until Aug. 4, 2011, at which time the bonds will convert to the weekly rate.

The bonds (Aa3/A+/) were sold on a negotiated basis with J.P. Morgan Securities LLC as the senior manager for the fixed-rate bonds and the sole manager for the variable-rate bonds. Citigroup Global Markets Inc. was the lead manager for the fixed-rate bonds.

Proceeds will be used to make upgrades to state buildings, including energy conservation measures, roof replacements and repairs, fire system improvements and upgrades, HVAC upgrades and window replacements.

Colorado brings TRANs

Also during the session, the State of Colorado priced $470 million of series 2011A general fund tax and revenue anticipation notes, said a pricing sheet.

The notes (MIG 1/SP-1+/) were sold competitively.

The notes are due June 27, 2012 and have a 2% coupon priced at 101.725.

Proceeds will be used to finance general fund requirements during the coming fiscal year ahead of the collection of taxes and revenues.

Harris County offers TANs

Another short-term deal came out of Harris County, Texas. The county sold $450 million of series 2011 tax anticipation notes on Tuesday, said a term sheet.

The bonds were sold competitively to several winners. J.P. Morgan Securities LLC took a $175 million piece of the deal with a 0.15075% true interest cost. Wells Fargo Bank, NA took a $100 million slice with a 0.15011% TIC and a $25 million piece with a 0.15011% TIC. Goldman Sachs & Co. won a $100 million piece with a 0.15011% TIC. Jefferies & Co. won a $50 million slice with a 0.15009% TIC.

The weighted TIC was 0.15036%.

The notes are due Feb. 29, 2012 and have a 2.5% coupon priced at 101.434.

Proceeds will be used to finance general fund requirements ahead of the collection of taxes.

MTA prices $400 million

Moving to the Empire State, the Metropolitan Transportation Authority of New York came to market with $400 million of series 2011A transportation revenue bonds, said a term sheet.

The bonds were sold on a negotiated basis with Bank of America Merrill Lynch and Loop Capital Markets LLC as the senior managers.

The bonds are due 2012 to 2031 with term bonds due 2036, 2037, 2038, 2041 and 2046. The serial coupons range from 2% to 5.25%. The 2038 bonds have a 5.25% coupon, and the remaining term bonds have 5% coupons.

Proceeds will be used to fund commuter and transit projects.

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