Yields keep rising as new supply puts on pressure; Palm Beach County Solid Waste brings bonds

By Sheri Kasprzak

New York, Oct. 6 - The municipals market continues to feel the pressure from a huge new supply of deals. Yields on Thursday were up anywhere from 2 basis points to 5 bps as new deals hit the market, said traders reached during the session.

Amid the swarm of primary action, the market has been struggling to keep up with the new supply, shoving yields up, said one trader.

"There's a lot of supply pressure," he noted.

Alan Schankel, managing director with Janney Montgomery Scott LLC, agreed.

"New issue supply continues to exert pressure on muni yields," Schankel wrote in a report Thursday.

He noted that even with the Columbus Day holiday approaching on Monday, the volume for the week ahead is estimated at $5.3 billion.

Schankel called Wednesday "one of the toughest days for tax-free bonds in recent memory." He added that the 10-year range has been hit the hardest over the past two weeks, moving up almost 50 bps to 2.44%.

Palm Beach solid waste prices

Leading the pack of new offerings, the Solid Waste Authority of Palm Beach County, Fla., sold Thursday $600 million of series 2011 refunding revenue bonds, said a term sheet.

The bonds (/AA+/) were sold through Citigroup Global Markets Inc.

The bonds are due 2012 to 2025 with a term bond due in 2031. The serial coupons range from 2% to 5%. The 2031 bonds have a split maturity with a 4.25% coupon priced at 98.28 and a 5% coupon priced at 104.946.

Proceeds will be used to refund the authority's series 2010 revenue bonds, which were used to make improvements to the county's solid waste facilities.

Lower Colorado brings bonds

Also during the session, the Lower Colorado River Authority of Texas sold $599.195 million of series 2011 transmission contract refunding revenue bonds, said a pricing sheet.

The offering included $409.195 million of series 2011A bonds and $190 million of series 2011B bonds.

The 2011A bonds are due 2012 to 2031 with term bonds due in 2033 and 2041. The serial coupons range from 1.5% to 5%. The 2033 bonds have a 5% coupon and priced at 102.675. The 2041 bonds have a split maturity with a 4.5% coupon priced at 96.818 and a 5% coupon priced at 102.287.

The 2011B bonds are due 2012 to 2026 with coupons from 1.5% to 5%.

The bonds (A2/A/A+) were sold through Morgan Stanley & Co. LLC and Barclays Capital Inc.

Proceeds will be used to refund outstanding transmission contract revenue notes and other transmission contract revenue debt.

North Carolina sells

Over in the competitive market, the State of North Carolina priced $367.35 million of series 2011B limited obligation refunding bonds, said a pricing sheet.

The bonds were sold competitively with Goldman Sachs & Co. winning the bid with a 2.664% true interest cost.

The bonds (/AAA/AAA) are due 2014 to 2023 with 4% to 5% coupons.

Proceeds will be used to refund the state's series 2003 lease purchase revenue bonds, series 2003A certificates of participation, series 2004 lease purchase revenue bonds, series 2004A-B COPs, series 2005 COPs and series 2006A COPs.

The offering, according to a statement from state treasurer Janet Cowell, will save the state $22.5 million in debt service costs.

"One of our responsibilities in the State Treasurer's office is to monitor these types of refinancing opportunities," Cowell said in the statement.

Mississippi prices G.O. bonds

In other offerings, the State of Mississippi brought to market $353.73 million of series 2011A capital improvement projects general obligation bonds, said a pricing sheet.

The bonds were sold through Morgan Stanley and Bank of America Merrill Lynch.

The bonds are due 2027 to 2031 with a term bond due in 2036. The serial coupons range from 3.5% to 5%. The 2036 bonds have a split maturity with a 4% coupon priced at 98.291 and a 5% coupon priced at 107.194.

Proceeds will be used to fund improvements to the Jackson Zoo, the Ohr-O'Keefe Museum, the Children's Museum, the Craft Center, the R.H. Harrison Complex, the Bureau of State-Owned Buildings and state and community colleges.

Honolulu preps deal

Looking at upcoming offerings, the City of Honolulu announced plans Thursday to price $232.08 million of series 2011 wastewater system revenue bonds, said a preliminary official statement. Pricing is anticipated during the week of Oct. 10.

The offering includes $164.955 million of series 2011A bonds and $67.125 million of series 2011B bonds.

The 2011A bonds are due 2016 to 2031 with term bonds due in 2036 and 2041. The 2011B bonds are due 2016 to 2023.

The bonds (Aa2/AA/) will be sold on a negotiated basis with Bank of America Merrill Lynch and Piper Jaffray & Co. as the senior managers.

Proceeds will be used to refund the city's series 2005A and 2006A-C wastewater system revenue bonds and to make improvements to the city's wastewater system.

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