Yields unchanged; visible supply dwindles as market anticipates Build America Bonds extension

By Sheri Kasprzak

New York, Dec. 6 - Municipal yields ended Monday mostly unchanged with a slightly firmer tone, said market insiders. The 30-day visible supply of municipals has dipped, said one market source, which may alleviate some pressure previously put on yields.

"It's been a pretty quiet day," said one trader in the afternoon.

"Yields are relatively flat. If there's any movement, it's by a basis point or so. There are some things trading, but it's been quiet for the most part."

Meanwhile, Tom Kozlik, municipal credit analyst at Janney Montgomery Scott LLC, said the 30-day visible supply dipped to $17 billion after reaching $26 billion for the week of Nov. 26.

"While some issuers will scramble to sell Build America Bonds before the 35% subsidy expires at the end of the year, we do not expect a barrage of volume because most anticipate BABs will be extended, although at a lower subsidy of around 32%," said Kozlik.

Turnpike deal planned

The week's pricing action will be headlined by a $1.5 billion sale of series 2010A turnpike revenue Build America Bonds from the New Jersey Turnpike Authority. The bonds (A3/A+/A) are scheduled to price on Wednesday through Goldman, Sachs & Co. and Citigroup Global Markets Inc.

The authority plans to use the proceeds to pay for construction projects as part of its 10-year capital improvement plan.

Alan Schankel, a managing director at Janney Montgomery Scott, said that Moody's Investors Service revised its outlook on the issuer to negative over concerns about the authority siphoning revenues for purposes other than turnpike uses.

"Much of the toll road's revenue was earmarked to pay for New Jersey's $1.25 billion portion of the canceled Hudson River rail tunnel but will now be used for other transportation projects," said Schankel.

The authority is based in East Brunswick Township, N.J.

San Francisco deal ahead

Also coming up on Wednesday, the Public Utilities Commission of the City and County of San Francisco is set to price $523.535 million of series 2010FG water revenue bonds, said a preliminary official statement.

The bonds (Aa2/AA-/) will be sold competitively with Backstrom McCarley Berry & Co. LLC as the financial adviser.

Proceeds will be used to construct, acquire and equip improvements to the county and city water system.

New York preps G.O. sale

Looking out on the horizon, the City of New York is slated to price $1.175 billion of series 2011 general obligation bonds on Dec. 15, said a preliminary official statement.

The deal includes $745 million of series 2011F-1 Build America Bonds, $130 million of series 2011F-2 taxable bonds, $245 million of series 2011G tax-exempt bonds and $55 million of series 2011H tax-exempt bonds.

The series 2011F-2 bonds will be sold competitively with Public Resources Advisory Group as the financial adviser. The rest of the bonds will be sold on a negotiated basis with J.P. Morgan Securities LLC as the senior manager.

The 2011F bonds are due 2012 to 2026 with term bonds, the maturities of which have not been set. The 2011G and 2011H bonds are due 2011 to 2021.

The city plans to use the proceeds for general capital needs.

Palm Beach deal planned

In other upcoming offerings, the Solid Waste Authority of Palm Beach County in Florida is expected to price $750 million of series 2010 improvement revenue bonds, said a preliminary official statement.

Citigroup is the senior manager for the sale.

The bonds are due Oct. 1, 2031.

Proceeds will be used to construct, equip, procure and install a waste-to-energy facility.

The authority is based in West Palm Beach, Fla.

Chicago plans water sale

Also ahead, the Metropolitan Water Reclamation District of Greater Chicago plans to price $500 million of series 2010 G.O. capital improvement bonds, said a preliminary official statement.

The deal includes $30 million of series 2010A taxable bonds, $70 million of series 2010B tax-exempt bonds and $400 million of series 2010C Build America Bonds.

The bonds (Aaa/AAA/AAA) will be sold on a negotiated basis with JPMorgan and Citigroup as the senior managers.

The 2010A bonds are due 2012 to 2014, and the 2010B bonds are due 2015 to 2018. The 2010C bonds are due 2019 to 2025 with a term bond due 2032.

Proceeds will be used to construct, remodel, rehabilitate and repair water facilities, flood-protection controls and pollution-control measures.

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