Municipals end flat ahead of massive $9.5 billion calendar; Golden State Tobacco tops list

By Sheri Kasprzak

New York, March 23 – Municipals remained mostly flat at the start of the week as investors waited for another big new-issue calendar – this time with $9.5 billion on tap, market insiders said.

Yields were unchanged even as Treasuries closed mixed with the 10-year yield falling by 1 basis point and the 30-year yield rising by 1 bp.

Meanwhile, California (Aa3/A+/A+) spreads have reportedly narrowed sharply since the Great Recession, according to a note from Alan Schankel, managing director with Janney Montgomery Scott LLC.

“The state is dependent on sales and income taxes for much of its revenue, and as revenue from these sources fell sharply, the state faced a structural budget deficit of about $24 billion coming into FY 2010,” Schankel wrote Monday.

“That year’s budget implemented very tough choices including significant reductions to K12 as well as university funding support.”

Those reductions and other measures helped spreads narrow from 192 bps in June 2009 to their current 26 bps level, he noted. The spread low was at 17 bps earlier this month, he said.

Golden State bonds ahead

In fact, the week’s largest offering comes out of the Golden State by way of the Golden State Tobacco Securitization Corp., which is slated to bring $1,704,990,000 of refunding bonds (A1/A/A) through joint bookrunners Barclays and Citigroup Global Markets Inc. Pricing is scheduled for Wednesday.

The deal will be utilized to refund the corporation’s series 2005A asset-backed bonds.

ISD deals abound

This week will also provide plenty of offerings from Texas independent school districts. Two of the bigger deals come from the North East Independent School District out of San Antonio and the Fort Worth Independent School District.

The North East deal will be conducted Wednesday through Citigroup and Stifel, Nicolaus & Co. Inc. Those bonds are due 2016 to 2037, and proceeds will refund the district’s series 2007A unlimited tax school building bonds.

The Fort Worth deal will hit the market Tuesday through J.P. Morgan Securities LLC.

Those bonds (Aaa/AAA/) are due 2016 to 2040, and proceeds will refund the district’s series 2005 and 2008 unlimited tax school building bonds and construct, equip, improve and renovate school facilities.

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