Municipal yields weaken after nearly a month-long rally; Oregon sells $312.3 million G.O.s

By Sheri Kasprzak

New York, May 19 - The nearly month-long rally the municipal bond market enjoyed has finally come to an end. The winning streak was curtailed by profit-taking and by weak Treasuries early in the session, market insiders reported.

"We knew it would end eventually," noted one trader reached during the day.

"It's mostly profit-taking, but Treasuries are off a bit. I don't necessarily think we're trending up again. It's a blip more than likely, but it is kind of a downer after watching it go for so long."

Yields were seen higher by 1 to 6 bps, with the middle of the curve suffering the most damage. Bonds in the 10-year range were seen up about 6 bps, said the trader. Longer bonds were barely moved.

Floating-rate bonds abound

Meanwhile, some issuers are choosing to eschew traditional, fixed-rate bonds for floating-rate debt, possibly because of the current low interest rate environment, said one sellside source.

"We're in an interest-rate environment right now that has a lot of people worried that we can only go up," said the sellsider.

"During times like this, it almost seems like a good idea to go with a floating-rate bond or note because the rate resets pretty frequently. Floating-rate debt isn't a bad thing for the right issuer, but a lot depends upon credit quality, especially these days."

The latest issuer to jump on the Libor bandwagon is the State of Louisiana, which announced Thursday that it plans to bring to market $177.13 million of series 2011-1 general obligation refunding Libor index bonds, said a preliminary official statement.

The bonds (Aa2//AA) will be sold on a negotiated basis with Morgan Stanley & Co. Inc. as the senior manager.

The bonds are due July 15, 2014.

Proceeds will be used to refund the state's series 2006A-B G.O. bonds.

Oregon sells G.O.s

Heading up the primary action, the State of Oregon sold $312,342,500 of series 2011 G.O. bonds (Aa1/AA+/AA+), according to a term sheet.

The sale includes $9,222,500 of series 2011I seismic grants bonds, $152.72 million of series 2011J state property bonds, $59.845 million of series 2011K Oregon Department of Transportation bonds and $90.555 million of series 2011L refunding bonds.

The 2011I bonds are due 2012 to 2031 with a term bond due in 2036. The serial coupons range from 2% to 4.25%. The 2036 bonds have a 4.5% coupon priced at 98.815.

The 2011J bonds are due 2012 to 2032 with a term bond due in 2036. The serial coupons range from 2% to 5%. The 2036 bonds have a 5% coupon priced at 109.025.

The 2011K bonds are due 2013 to 2032 with a 2036 term bond. The serial coupons range from 3% to5%. The 2036 bonds have a 5% coupon priced at 109.025.

The 2011L bonds are due 2014 to 2018 and 2021 to 2026 with 5% coupons across the board.

Citigroup Global Markets Inc. and Bank of America Merrill Lynch were the senior managers.

Proceeds will be used to fund seismic research, state property improvements, Oregon Department of Transportation improvements, as well as to refund the state's series 2001B bonds.

University of Arkansas prices

Elsewhere in the primary market, the University of Arkansas priced $110.12 million of series 2011 revenue bonds, according to a pricing sheet.

The sale included $101.225 million of series 2011A various facility revenue bonds and $8.895 million of series 2011B various facility revenue refunding bonds.

The 2011A bonds are due 2011 to 2031 with term bonds due in 2036 and 2040. The serial coupons range from 2% to 4.25%. The 2036 bonds have a 4.625% coupon priced at 99.036, and the 2040 bonds have a 5% coupon priced at 105.732.

The 2011B bonds are due 2018 to 2022 with a term bond due in 2012. The serial coupons range from 3% to 5%. The 2012 bonds have a 3% coupon priced at 103.195.

Crews & Associates and Stephens Inc. were the senior managers for the bonds (Aa2).

Proceeds will be used to make capital improvements to the university's Fayetteville campus, as well as to refund the university's series 1997 and 2001A bonds.

San Jacinto brings bonds

Also during the session, the San Jacinto River Authority of Texas came to market with $83.155 million of series 2011 Groundwater Reduction Plan Division special project revenue bonds, according to a pricing sheet.

The bonds were sold through Morgan Keegan & Co. Inc.

The bonds are due 2014 to 2025 with term bonds due in 2027, 2032 and 2037. The serial coupons range from 3% to 5.25%. The 2027 bonds have a 4.5% coupon priced at 97.734. The 2032 bonds have a 5% coupon priced at 99.087, and the 2037 bonds have a 5% coupon priced at 97.143.

Proceeds will be used to conserve, protect and enhance groundwater resources in Montgomery County, Texas.

Erie IDA preps school deal

Looking to the coming week's offerings, the Erie County Industrial Development Agency of New York is set to price $284 million of series 2011 school facilities revenue bonds for the Buffalo City School District on Wednesday, according to a preliminary official statement.

The bonds (Aa3/AA-/) will be sold through Citigroup Global Markets Inc.

The sale includes $170 million of series 2011A revenue bonds and $114 million of series 2011B refunding bonds.

The 2011A bonds are due 2013 to 2032, and the 2011B bonds are due 2012 to 2024.

Proceeds will be used to fund improvements and repairs to Buffalo schools, as well as to refund the agency's series 2003 bonds.

Based in Buffalo, N.Y., the agency provides funding for industrial development and education throughout the county.

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