Munis weaken somewhat in intermediate, long maturities; New York State Environmental prices

By Sheri Kasprzak

New York, May 15 - Municipals closed out the day flat on the short side of the curve and softer outside of 10 years in sympathy with Treasuries, said traders reached during the day.

"It's not a great deal cheaper, but maybe a basis point or two, particularly outside of 10 years," one trader said.

There was little change, however, among higher-grade munis, the trader noted, as new issues came to market and were well received by investors.

Meanwhile, the new issues in the week ahead should be well absorbed, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"This week's new issue calendar has more substance than we've seen in recent weeks, but with no single issue exceeding $500 million and strong investor demand evident, absorption of the week's supply should pose little problem," Schankel said in a report released Tuesday.

California facing deficit

In other news, California could be facing a $16 billion deficit for the fiscal year beginning July 1, said Schankel.

Revenue collections are coming in below estimates for the state (A1/A-/A-).

"The governor is pursuing gap-closing measures, including a four-day workweek for state employees and $8 billion in other cuts," Schankel wrote.

"On the revenue side, the governor has proposed increases in both sales and income tax, with a ballot measure up for voter approval in November. The clock is ticking with a balanced budget due by June 15."

New York water deal prices

Leading Tuesday's primary activity, the New York State Environmental Facilities Corp. sold $503.76 million of series 2012A clean and drinking water revolving fund revenue bonds, said a pricing sheet.

The bonds (Aaa/AAA/AA+) were sold through senior managers Morgan Stanley & Co. LLC and Ramirez & Co. Inc.

The bonds are due 2013 to 2029 with 2% to 5% coupons.

Proceeds will be used to refund existing debt issued to finance drinking and clean water clean-up initiatives.

Seattle brings debt

Also during the session, the City of Seattle came to market with $238.77 million of series 2012 water system refunding revenue bonds, said a pricing sheet.

The bonds (Aa1/AA+/) were sold competitively with Citigroup Global Markets Inc. winning the bid, said Michael Van Dyck, debt manager for the city. The true interest cost came in at 2.622622%.

The bonds are due 2012 to 2034 with 2% to 5% coupons.

Van Dyck told Prospect News that the city chooses to sell its plain vanilla debt on a competitive basis.

Proceeds will be used to refund the city's series 2001, 2003 and 2004 water system revenue bonds.

The city came to market earlier this month with $126.5 million of general obligation refunding bonds. J.P. Morgan Securities LLC was the winner of that offering with a 2.659% true interest cost.

Fairfax bonds price

Elsewhere, the Fairfax County Economic Development Authority of Virginia sold $65,395,000 of series 2012A Fairfax County facilities revenue bonds, said a pricing sheet.

The bonds (Aa1/AA+/AA) were sold competitively with Bank of America Merrill Lynch winning the bid, according to Tom Lawson, attorney for the authority. The TIC for the deal was 3.752181%.

The bonds are due 2013 to 2033 with term bonds due in 2037 and 2042. The serial coupons range from 4.5% to 5%. The 2037 bonds have a 4.5% coupon and priced at 106.314 to yield 3.65%. The 2042 bonds have a 4.5% coupon priced at 105.929 to yield 3.70%. Yields range from 0.35% to 3.7%, said Lawson.

Proceeds will be used to construct a 200,000-square-foot building to house a new Woodburn Mental Health Center and related parking facility as well as construct a neighborhood community center, the Providence Community Center in Fairfax, Va.

Lawson said Tuesday that the authority is also planning to close $83.63 million of series 2012 Route 28 transportation contract revenue refunding bonds on May 23. That deal is being conducted in conjunction with Loudon County.

Olympia school sells G.O.s

Also during the day's primary action, the Olympia School District No. 111 of Washington priced $54,415,000 of series 2012 unlimited tax G.O. refunding bonds, said a pricing sheet.

The bonds (Aa2/A+/) were sold competitively. Ryan Betz, spokesman for the district, said the winning bidder will be available Wednesday.

The bonds are due 2014 to 2023 with 4% to 5% coupons.

The offering, according to a statement released by Betz Tuesday, will save the district $4.9 million.

"The district has been monitoring bond market conditions over the past year, and recent low interest rates allowed the district to actually exceed their target savings," the statement said.

"Interest rates averaged 1.94% on the new bonds, compared to 4.8% on the old debt."

Proceeds will be used to advance refund the district's series 2003 and 2005A G.O. bonds.

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