Primary activity tapers; FYI gears up for $300 million Department of Information Services sale

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, July 20 - Municipals got off to a slow start this week, with little activity reported in either the primary or the secondary markets.

Yields were seen up by a couple of basis points, a trader mentioned during the early afternoon.

"We're looking a little bit weaker, but not much," she said. "Really pretty flat mostly. We're not seeing a lot of demand today, which is pretty typical for a Monday."

Municipals were weaker, despite some gains in Treasuries. This is particularly ironic because municipals saw strength last week, even as Treasuries dropped.

Monday's markets seemed uneager and sluggish, another trader, senior vice president Anthony Shields of Grigsby & Associates, pointed out.

"The feeling right now is kind of like the August doldrums," he said. "It's a little too early for my taste. I think the yields have run pretty substantially less."

Aside from major issues from the Pennsylvania Turnpike Commission and the New York City Transitional Finance Authority, the week looks to remain quiet, he said.

The retail offer period for the Transitional Finance Authority begins Tuesday.

The Transitional Finance Authority deal is new money, he said, "which is a big deal to some people," but the bonds are "still going to the New York focus" for the week.

Plus, "the usual Cal nonsense," he said.

BABs still attractive

In the broader market, Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC, said Build America Bonds are still attractive three months after they were first launched. So far, nearly $16 billion in Build America Bonds have come to market, LeBas said.

"Yields on BABs are still relatively attractive," LeBas said.

"Taxable bonds are frequently quoted on spread to Treasury rather than absolute yield, so that a 10-year bond yield [of] 5.04% when the 10-year yield's 3.64% is said to trade at a 260 spread. N.J. Turnpike was one of the earliest BAB issues, and the 370 basis point spread was a relative high point. As can be seen by the new issue levels of various toll road issues, spreads initially tightened (Pennsylvania Turnpike at +165 [bps]) and subsequently widened."

Penn Turnpike deal

Meanwhile, the slate of upcoming sales is expected to taper off somewhat this week. The calendar had previously been loaded down with new issues, but only a few stand-out deals will dominate the schedule.

The biggest deal of the week is set for Tuesday. The Pennsylvania Turnpike Commission is scheduled to roll out a $956.7 million sale of series 2009B-C subordinate revenue bonds through Citigroup Global Markets Inc.

Proceeds will fund transportation grants to mass transit agencies as well as various turnpike projects.

The other large offering of the week is coming to market on Thursday. The New York City Transitional Finance Authority is slated to sell $900 million in series 2010A future tax secured bonds. A portion of the bonds will be sold through lead manager J.P. Morgan Securities Inc. The balance will be sold competitively.

The bonds are due 2011 to 2039, and proceeds will fund capital expenditures.

FYI: bond sale ahead

Elsewhere, FYI Properties of Washington State is scheduled Tuesday to price $298.795 million in series 2009 tax-exempt lease revenue bonds, said a calendar of upcoming sales.

The bonds will be sold on a negotiated basis with Barclays Capital Inc. as the senior manager.

The bonds are due 2012 to 2029 with term bonds due 2034 and 2039.

Proceeds will be used to construct new headquarters for the Washington State Department of Information Services. The department is based in Olympia.

North Carolina treasurer sale

Also coming up on Tuesday, the North Carolina Department of State Treasurer is set to sell $258.365 million in series 2009 grant anticipation revenue vehicle bonds (Aa3/AA-/AA).

Merrill Lynch & Co. Inc. is the senior manager for the bonds, which are due 2010 to 2021.

Proceeds will fund the state's Garvee projects.

Florida DOT gears up

Also on Tuesday, the State of Florida Department of Transportation is expected to price $200 million in series 2009A right-of-way acquisition and bridge construction bonds Tuesday, said a notice of sale released Monday.

The bonds (Aa1/AAA/AA+) will be sold competitively.

The bonds are due 2010 to 2039.

Proceeds will be used to acquire real property and rights-of-way to construct bridges throughout the state.

Deals downtown

The Downtown Development Authority of Dahlonega, Ga., plans to sell a $78.84 million series 2009 revenue bond (Aaa/A+/) for the North Georgia PHD LLC Project, according to bond counsel Doug Parks.

The bonds are insured by Assured Guaranty Corp.

Purchasing insurance "is always a customary practice of this institution," Parks said.

Pricing is expected during this week, but there is "still some fine tuning of the deal," he said.

Merchants National Bank & Trust Co. will act as underwriter for the negotiated deal.

Proceeds will be used to construct a 600-bed dormitory, a 1,000-car garage, a dining facility and cadet housing at the North Georgia College and State University.

Newark Housing

The Newark Housing Authority, N.J., announced that it will offer a $68 million series 2009A city-secured police facilities revenue bond (Aa2//, Baa2 underlying), according to a calendar of upcoming sales.

The bonds are insured by Assured Guaranty.

Pricing is expected on Tuesday.

Loop Capital Markets LLC will act as underwriter for the negotiated deal.

Proceeds will be used for the South Ward police facilities.

Golden State bonds

Oakland, Calif., announced that it will sell a $64 million series 2009A general obligation bond (A1/AA-/A+), according to a calendar of upcoming sales.

The bonds are scheduled to price on Wednesday.

The bonds will carry maturities from 2010 to 2039.

JPMorgan will act as underwriter for the negotiated deal.

Also in California, the Santa Monica-Malibu Unified School District will sell $60 million in G.O. bonds (Aa2/AA/), according to Jan Maez, chief financial officer.

The series 2009B bonds will be split into a $12.47 million tranche of tax-exempt bonds and a $47.53 million tranche of Build America Bonds.

RBC Capital Markets Corp. will act as underwriter for the negotiated bonds.

Proceeds will be used for school construction and modernization.

The bonds are scheduled to price on Wednesday.

The school district is based in Santa Monica, Calif.

Texas school bonds

Coming out of Texas are two school bonds during the week.

Palestine Independent School District, Texas, will sell $63.965 million series 2009 unlimited tax school building bonds, according to a calendar of upcoming sales.

First Southwest Co. will act as underwriter for the negotiated bonds.

The bonds are expected to price on Thursday.

Elsewhere under the Lone Star, the Carroll Independent School District will offer $78.12 million in two tranches, according to a calendar of upcoming sales.

The $57.34 million series 2009B Build America Bonds and the $20.78 million unlimited tax refunding bonds will be sold this week.

RBC Capital Markets will act as underwriter for the negotiated deal.

The Carroll Independent School District is located in Grapevine, Texas.

Secondary seen weaker

Moving to the secondary market, some weakness crept into the market, with yields gaining a couple of basis points, traders said.

Despite low trading volume, the Louisiana Public Facilities Authority's bonds sold for the Franciscan Missionaries of Our Lady of Lourdes were moving. The 5% 2014 bonds were seen at 4% Monday. The 6.375% 2030s were seen at 6.418%.

Also on Monday, the Sacramento County Airport System's series 2009D subordinated bonds were seen in action. The 5.1% 2024s were seen trading at 4.98% in the afternoon. The 5% 2028s were seen near par, as were the 5.625% 2029 bonds.

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