Muni yields seen slightly weaker; Illinois gears up for $3.47 billion G.O. sale on Thursday

By Sheri Kasprzak

New York, Jan. 4 - As the municipals market got back down to business following the New Year holiday, some weakness was seen across the board.

"It's been pretty quiet, but we're seeing yields up by about a basis point," one trader said.

"We're looking at a decent supply for the week ahead, so I feel like it might be an off week for secondary overall."

Meanwhile, the State of Illinois is expected to bring to market $3.466 billion in series 2010 taxable general obligation bonds on Thursday.

"We expect it to go OK," said one market insider familiar with the deal.

"There's been some trepidation with Illinois among investors, but I think it will be well-received. They're fairly well-rated. I would say it might go a little cheap."

The bonds (A2/A+/A) will be sold through J.P. Morgan Securities Inc. and are due 2011 to 2015.

Proceeds will fund contributions to the state's retirement fund as well as capital expenditures.

Also coming up on Thursday, the New Jersey Transportation Trust Authority plans to sell $852.5 million in series 2010 transportation system capital appreciation bonds (A1/AA/A+) through Barclays Capital Inc.

The bonds will fund transportation infrastructure projects.

Frederick County sale planned

Coming up on Tuesday, primary action will be led by a $188.73 million sale of series 2010 consolidated public improvement bonds from Frederick County in Maryland.

The bonds (Aa2) will be sold on a competitive basis with Davenport & Co. LLC as the financial adviser.

The deal includes $59.705 million in series 2010A tax-exempt bonds, $90.115 million in series 2010B Build America Bonds and $38.91 million in series 2010C refunding bonds.

Proceeds will fund capital improvements.

The county seat is Frederick, Md.

Chicago G.O. sale ahead

Out on the horizon, the City of Chicago is expected to price $773 million in series 2009 taxable project G.O. bonds, said a preliminary official statement.

The sale includes $420 million in series 2009A refunding bonds, $110 million in series 2009B refunding bonds, $110 million in series 2009C Build America Bonds and $133 million in series 2009D recovery zone economic development bonds.

The bonds will be sold on a negotiated basis with Siebert Brandford Shank & Co. LLC as the lead manager.

Proceeds will be used to finance public right-of-way infrastructure improvements, finance infrastructure improvements to encourage economic development, conduct transportation improvements, make grants to educational and non-profit organizations and refund existing debt.

Virginia Beach to sell $106.06 million

Also coming up, the City of Virginia Beach plans to price $106.055 million in series 2009 G.O. public improvement refunding bonds, said a preliminary official statement. The bonds are scheduled to price on Jan. 12.

The sale includes $22.08 million in series 2009A bonds and $83.975 million in series 2009B bonds.

The bonds (Aa1/AAA/AA+) will be sold on a competitive basis with Government Finance Associates Inc. as the financial adviser.

The 2009A bonds are due 2010 to 2021, and the 2009B bonds are due 2010 to 2022.

Proceeds will be used to refund existing debt.

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