Pennsylvania, Georgia offer big deals amid major influx of new bonds; yields weaken slightly

By Sheri Kasprzak

New York, Oct. 5 - It was yet another big day for the primary market as billions in new bonds priced. Meanwhile, yields continued to struggle.

One trader reached in the afternoon said yields were up by 1 to 2 basis points on the day Tuesday.

"It's not as bad as yesterday, but there's definitely a weaker tone," he said.

"I suspect that once things taper off [in primary], it will probably be less volatile."

The market once again experienced a huge push of new deals, led by a $1 billion sale of series 2010-2011 tax anticipation notes from the Commonwealth of Pennsylvania.

"We received bids from nine firms," said Rick Dreher, the director of revenue, capital and debt for the Pennsylvania Governor's Budget Office Tuesday.

The notes are due June 30, 2011 and have a 2.5% coupon priced at 101.57.

"We're very happy with the sale," Dreher said.

"We last offered tax notes of $800 million in December of 2009, and our TIC was 30 bps at that time. This sale was at 32 bps, so it's certainly a very attractive rate for us. We're pleased with the turnout for the sale and the final results."

J.P. Morgan Securities LLC won the competitive bid for the notes.

Proceeds will provide cash for payroll and other operating expenses.

Peach State bonds price

Elsewhere, the State of Georgia came to market Tuesday with $653.925 million of its planned $974.98 million sale of series 2010 general obligation bonds (Aaa/AAA/AAA), said Lee McElhannon, the state's bond finance director. The state has postponed a $68.93 million tranche of series 2010A-1 refunding bonds and a $252.125 million tranche of series 2010A-2 refunding bonds.

"Rates just kept creeping up on us," McElhannon said in an interview Tuesday.

"It's a very interest-rate sensitive refunding, so we decided to postpone it for now."

The sale included $170.165 million in series 2010B G.O.s, $360.4 million in series 2010C-1 and series 2010C-2 Build America Bonds, $94.605 million in series 2010C-3 recovery zone economic development bonds and $28.755 million in series 2010C-4 qualified school construction bonds.

Citigroup Global Markets Inc. won the 2010B, 2010C-1, 2010C-2 and 2010C-3 bonds, and Barclays Capital Inc. won the series 2010C-4 qualified school construction bonds.

The 2010B bonds are due 2011 to 2020 with 2% to 5% coupons. The 2010C-1 bonds are due 2011 to 202016 with 3% to 5% coupons. The 2010C-2 bonds are due 2017 to 2030 with 2.58% to 4.565% coupons, all priced at par. The 2010C-3 bonds are due 2013 to 2030 with 1.19% to 4.67% coupons, all priced at par. The 2010C-4 bonds are due Oct. 1, 2029 and have a 4.55% coupon priced at par.

Proceeds will be used to finance projects for various state agencies, schools and departments.

Louisiana sells bonds

In other primary news Tuesday, the State of Louisiana priced $301.075 million in a downsized offering of series 2010 G.O. refunding bonds on Tuesday, said a pricing sheet. The state planned to sell $375.22 million of the bonds.

The sale included $209.565 million in series 2010A bonds and $91.51 million in series 2010B bonds.

The bonds (Aa2/AA-/AA) were sold competitively. Calls to the issuer for the winning bidder were not immediately returned Tuesday.

The 2010A bonds are due 2013 to 2022 with 3% to 5% coupons. The 2010B bonds are due 2011 to 2012 and 2015 to 2019. The coupons range from 2% to 5%.

Proceeds will be used to refund the state's series 2000A, 2002A, 2003A and 2004A bonds.

Milwaukee sells RANs

Elsewhere, the City of Milwaukee priced $225 million in series 2010M8 school revenue anticipation notes on Tuesday, said a pricing sheet and a sellsider close to the deal.

The bonds (/SP-1+/) were sold in two tranches - a $50 million piece and a $175 million piece.

Citigroup won $20 million of the $50 million portion with Barclays winning another $20 million portion and PNC Capital Markets taking the remaining $10 million. The combined true interest cost came in at about 29 bps.

Piper Jaffray & Co. took $85 million of the $175 million portion with Citigroup taking $25 million and Wells Fargo Securities LLC winning the remaining $65 million. The combined TIC for the $175 million portion came out to 36 bps, said the sellsider.

The notes are due Dec. 29, 2010 and June 27, 2011. The Dec. 29, 2010 notes have 1.25%, 1.5% and 2% coupons. Only the 2% notes were reoffered, and they were reoffered at 100.294. The June 27, 2011 notes have 1.5% and 2% coupons. The 2% notes were reoffered at 101.087.

Proceeds will be used to finance school general operating needs ahead of the receipt of school state aid payments.

Broward notes price

Another note sale came from the Broward County School District of Florida, which priced $125 million in series 2010 tax anticipation notes, said a pricing sheet.

The bonds (MIG 1) were sold competitively with JPMorgan winning the bid.

The 1% notes are due Jan. 13, 2011 and priced at 100.156 to yield 0.33%. The net interest cost came in at 0.335714%, said Henry Robinson, the district's treasurer.

Proceeds will be used to provide interim funds for operating expenses.

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