Utah sells $1.04 billion in bonds, including BABs with record-low spreads on 10-year bonds

By Sheri Kasprzak

New York, Sept. 16 - Municipal bonds rallied to the highest level that some market insiders can remember Wednesday as institutional investors turned their attention to tax-exempt bonds and retail investors returned to the market.

"I've been doing this about five years," one sellside source said. "This is the highest they've gone [against Treasuries]."

Thirty-year, triple A-rated municipal yields dropped 21 basis points to 5.67% Wednesday, the sellsider reported.

"I think retail [investors] are starting to move back into the market because we look good compared to stocks. Institutional seems to be focusing more on tax-exempt, and there actually seems to be some supply of tax-exempt to actually buy now."

The sellsider noted that Build America Bonds have taken away a lot of the tax-exempt supply, but some issuers are issuing tax-exempt bonds again.

Among the steady flood of offerings in primary Wednesday was a $1,041,260,000 sale of general obligation bonds and G.O. Build America Bonds from the State of Utah.

One market source reached Wednesday said the bonds are particularly interesting because of record-low spreads on the shorter-term bonds.

The 10-year Build America Bonds priced at 4.154%, 70 bps more than comparable Treasuries, said the sellsider.

"It's one of the few [issuers] out there with a triple-A across the board," said one sellside source asked about the bonds during the afternoon.

"I think that makes it really attractive."

Utah bonds price at record spread

The Utah sale included $729.545 million in series 2009D Build America Bonds and $311.715 million in series 2009C G.O. bonds.

The 2009D bonds are due 2019 and 2024. The 2019 bonds have a 4.154% coupon, priced at par, and the 2029 bonds have a 4.554% coupon, also priced at par. The 2029 bonds were priced at a 110 bps spread to comparable Treasuries.

The 2009C bonds are due 2011 to 2018 with coupons from 2% to 5%.

Both bonds (Aaa/AAA/) were sold through Morgan Stanley & Co. Inc.

Proceeds will be used to fund highway improvements and improvements to higher educational facilities throughout the state.

Missouri Highways offers $600 million

Also on Wednesday, the Missouri Highways & Transportation Commission sold $600 million in series 2009 reimbursement state road fund bonds, according to a term sheet.

The deal includes $341.575 million in series 2009A federally taxable Build America Bonds and $258.425 million in series 2009B tax-exempt bonds.

The 2009A bonds are due 2011 to 2021 with coupons from 2% to 5%. The 2009B bonds are due 2022 to 2026 with a term bond due 2033. The serials have coupons from 4.802% to 5.252%, priced at par, and the term bond has a 5.445% coupon, also priced at par.

Merrill Lynch & Co. Inc. was the senior manager.

Proceeds will fund the state's bridge improvement program.

Dasny brings $555.47 million

Elsewhere, the Dormitory Authority of the State of New York priced $555.465 million in series 2009 State of New York consolidated service contract refunding revenue bonds on Wednesday, according to a pricing sheet.

The sale included series 2009A bonds and a series 2009B term bond. The series 2009A bonds are due 2010 to 2025 with coupons from 1.5% to 5%. The 2009B bond is due 2010 with a 1.5% coupon.

The bonds (/AA-/A+) were sold on a negotiated basis with Citigroup Global Markets Inc., Ramirez & Co. Inc. and Merrill Lynch as the senior managers.

Proceeds will be used to refund existing debt from the New York Housing Finance Agency.

Central Puget Sound RTA prices

In other primary deals, the Central Puget Sound Regional Transit Authority of Washington priced Wednesday $376.845 million in series 2009 sales tax and motor vehicle excise tax bonds, said a term sheet.

The sale included $300 million in series 2009P-2T Build America Bonds and series 2009P-1 bonds and $76.845 million in series 2009S-2T Build America Bonds.

The 2009P-2T Build America Bonds are due 2039 and have a 5.491% coupon, priced at par. The 2009P-1 bonds are due 2015 to 2016 with 3% to 5% coupons. The 2009S-2T Build America Bonds are due 2024 and 2028 with 4.845% and 5.145% coupons, respectively. Both are priced at par.

Citigroup was the bookrunner for the series 2009P-1 bonds. Citigroup and Goldman, Sachs & Co. were the joint bookrunners for the series 2009P-2T and 2009S-2T Build America Bonds.

Proceeds will be used to pay for or reimburse the authority for constructing, planning, designing or extending improvements to the authority's high-capacity transportation facilities.

The Central Puget Sound Regional Transit Authority is based in Seattle.

Honolulu brings $281.62 million

Down in the Aloha State, the City and County of Honolulu in Hawaii sold $281.615 million in series 2009 wastewater system revenue bonds, said a pricing sheet. The bonds priced Tuesday.

The deal includes $84.365 million in series 2009A first bond resolution bonds, $40.775 million in series 2009B taxable first bond resolution Build America Bonds, $29.43 million in series 2009C taxable first bond resolution recovery zone economic development bonds and $127.045 million in series 2009A second bond resolution bonds.

The 2009A first bond resolution bonds are due 2010 to 2028 with coupons from 2% to 5%, and the 2009B Build America Bonds are due 2029 and 2035 with 6.114% and 6.339% coupons, respectively, both priced at par. The 2009C bonds are due 2039 with a 6.339% coupon, priced at par. The 2009A second bond resolution bonds are due 2010 to 2023 with coupons from 2% to 5%.

Merrill Lynch and Piper Jaffray & Co. were the senior managers.

Proceeds will be used to fund improvements to the city and county wastewater system.

Ohio Water sells $225 million

Also priced Wednesday, the Ohio Water Development Authority sold Wednesday $225 million in series 2009 water pollution control revenue refunding bonds, said a pricing sheet.

The bonds are due 2009 to 2015 with coupons from 2% to 5%.

Merrill Lynch was the senior manager.

Proceeds will be used to refund existing debt.

Gainesville utility bonds price

In other news, the City of Gainesville, Fla., priced Tuesday $181.09 million in series 2009 utilities system revenue bonds for the Gainesville Regional Utilities, said a pricing sheet.

The sale included $156.9 million in series 2009A federally taxable Build America Bonds and $24.19 million in series 2009B taxable revenue bonds.

The bonds (Aa2/AA/) were sold on a negotiated basis with J.P. Morgan Securities Inc. as the lead manager. The series 2009A bonds are due 2010 to 2015 with coupons from 0.85% to 3.589%, all priced at par. The 2009B bonds are due 2015 to 2020 with term bonds due 2024, 2029 and 2039. The serials have coupons from 3.589% to 4.847%, all priced at par. The 2024 bonds have a 5.147% coupon, the 2029 bonds a 5.605% coupon and the 2039 bonds a 5.655% coupon. The term bonds also priced at par.

Proceeds will be used to acquire and improve the city's telecommunications system and refund the city's series D commercial paper notes.

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