Munis firm again ahead of holiday-shortened week; California brings $1.25 billion G.O. bonds

By Sheri Kasprzak

New York, Nov. 22 - Municipal yields were seen firmer to kick off the short holiday week, said market insiders. Meanwhile, the State of California dominated headlines as it came to market with an upsized offering of $1.25 billion of series 2010 various-purpose tax-exempt general obligation bonds.

Yields were reportedly down by 3 to 5 basis points across the curve as primary action finally tapered off ahead of Thanksgiving.

"It's pretty much taken a holiday to slow things down enough to get yields back under control," said one trader reached in the afternoon.

"I suspect things will probably stay fairly positive, maybe flatten off by midweek as we go into the holiday."

Heading up a comparatively busy Monday for pricings was California's $1.25 billion G.O. offering, which priced for institutional investors a day earlier than planned following huge retail interest in the deal.

Retail investors bought up $987.3 million of the originally planned $1 billion offering on Friday. The retail order period was extended into Monday, but the state opened it up to institutions Monday afternoon and closed the sale.

The heavy retail demand, said Tom Dresslar, spokesman for the state treasurer's office, also helped reduce yields by 2 to 3 bps from preliminary prices quoted to retail investors in all maturities except the 2025 to 2028 and 2035 maturities. The 2040 bonds were not offered to retail investors.

The bonds (A1/A-/A-) were sold through RBC Capital Markets Corp.

The bonds are due 2011 and 2013 to 2030 with term bonds due 2035 and 2040. The serial coupons range from 3% to 5.25%, and yields range from 1.87% to 5.28%. The 2035 bonds have a 5.375% coupon priced at par and a 5.5% coupon priced to yield 5.375%. The 2040 bonds have a 5.25% coupon priced to yield 5.5%.

"We're grateful for the huge retail demand this deal attracted and happy to be successfully through a $14 billion-plus stretch of sales," Dresslar said in a statement. "Now we can catch our breath and give the market a breather."

Proceeds will be used to finance capital projects, including schools; roads; housing; children's hospitals; flood-protection projects; air, water and coastal protection projects; libraries; prisons; veterans' homes; and parks.

Ohio brings $300 million

In other pricing news Monday, the State of Ohio priced $300 million of series 2010 higher education G.O. bonds, said a pricing sheet.

The sale included $4.535 million of series 2010D tax-exempt bonds and $295.465 million of series 2010E.

The 2010D bonds are due Aug. 1, 2012 and have a 1.409% coupon priced at par. The 2010E bonds are due 2013 to 2024 with a term bond due in 2030. The serial coupons range from 1.615% to 4.861%, all priced at par. The 2030 bonds have a 5.278% coupon priced at par.

Huntington Investment Co. and Barclays Capital Inc. were the senior managers.

Proceeds will be used to fund capital needs for state-supported higher education facilities.

Wisconsin sells $200 million

Elsewhere, the State of Wisconsin came to market Monday with $200 million of series 2010 transportation revenue bonds, said David Erdman with the state's capital finance office.

The sale included $76.075 million of series 2010A bonds and $123.925 million of series 2010B Build America Bonds.

The bonds were sold competitively with J.P. Morgan Securities LLC winning the 2010A bonds and Robert W. Baird & Co. Inc. winning the 2010B bonds. The true interest cost for the 2010A bonds was 2.569477%, and the TIC for the 2010B bonds was 3.731825% with the 35% subsidy, said Erdman.

The 2010A bonds are due 2012 to 2021 with 5% coupons across the board. The 2010B bonds are due 2022 to 2031 with coupons from 4.7% to 6%, all priced at par.

"Bidders for the series B bonds could submit bids as either tax-exempt bonds or as taxable bonds, in which case the state would elect to treat the series B bonds as Build America Bonds with the state receiving the subsidy payment on each interest payment date," Erdman said.

"The state did not receive any tax-exempt bids, and Robert W. Baird & Co. Inc. submitted the winning taxable bid for the series B bonds."

Proceeds will be used to finance transportation infrastructure projects.

L.A. water deal ahead

Coming up in primary during the shortened week, the Los Angeles Department of Water and Power will bring $760.2 million of series 2010 power system revenue bonds through Goldman Sachs & Co. and De La Rosa & Co.

Retail orders were taken Monday for the bonds, the proceeds of which will be used to make improvements to the city's power supply system.

Also on Tuesday, the Metropolitan Transportation Authority of New York plans to sell $755 million of series 2010D transportation revenue bonds through Citigroup Global Markets Inc. and JPMorgan.

Proceeds will be used to pay holders of transportation revenue notes CP-1.

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