Munis stay unchanged, but tone firms ahead of heavy supply; Nassau County brings $150 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, June 22 - The municipals market saw little movement as the week got under way, but the tone had a firmer feeling about it, according to a trader reached in the afternoon.

"There's not a lot of activity going on, but we might be a basis point or two better on the long end," the trader said. "We're feeling firmer. Investors are kind of waiting to see what the week is going to look like, so not a lot is moving."

The taxable Build America Bonds may be "taking some of the pressure off the munis," another trader said, but investors are mainly "sticking to higher-yielding new issues."

"That's where the values are right now," he said. "They price cheap."

Still, some investors have taken a different route and look for higher-rated paper such as the Nassau County, N.Y., bonds that priced on Monday, he said.

"I really think the Treasury curve is the real benchmark," he said, as opposed to the MMD curve.

On the retail side of trading, the City of Atlanta's water and sewer bonds have performed well since the upsized $750 million deal priced last Tuesday, he said, adding the explanation: "High yields."

In ratings news Monday, the State of California repaid $3.94 billion in revenue anticipation notes sold in October 2008, said Tom Dresslar, spokesman for treasurer Bill Lockyer. The move comes after the state received a stern talking-to from Standard & Poor's. Moody's Investors Service also placed the state's general obligation bonds on review for possible downgrade.

Nassau sells $150 million

Moving back to Monday's Nassau County sale, the county priced $150 million in series 2009C-D G.O. bonds (A2/A+/A+) at a 5.07157% true interest cost, said Nancy Winkler, a managing director with Public Financial Management Inc.

The county priced $135.3 million of series 2009C general improvement bonds and $14.7 million of series 2009D water and storm water resources district bonds.

The bonds weren't insured, Winkler said, adding that for a well-known and highly rated credit such as Long Island's Nassau County, insurance is not necessary.

Insurance can be valuable to lower-rated credits, she said.

The expectation was that the bonds would price "better than the average A rated credit; and I think that bore out," she said.

Interest in the paper was piqued by the "relative scarcity" of issuance from Nassau County, especially compared to other New York-area issuers.

The issues carry serial bonds due from 2010 to 2039 and term bonds due from 2032 to 2035 and 2036 to 2039.

Barclays Capital Inc. won the auction over six other bidders.

Proceeds will be used to refinance outstanding debt and for improvements to the sewer and water drainage system.

The Nassau County seat is located in Mineola, N.Y.

Bat City schools price

Elsewhere in pricing action, the Austin Independent School District of Texas priced $100 million series 2009 unlimited tax school building and refunding bonds (Aa1/AA+/AA) at a 4.622414% TIC, according to Steve West, district interim chief financial officer.

The bonds carry serial maturities from 2010 to 2031; a term bond matures in 2034. Coupons range from 2% to 5%.

"I feel like it did good," West said, and the TIC was "about what we expected."

The timing of the deal came in line with the district's board meetings, West said, adding that the district still has two authorizations open to issue new debt.

Morgan Stanley & Co. acted as underwriter for the negotiated bonds. Public Financial Management Inc. acted as financial adviser.

Proceeds will refund approximately $82 million in outstanding debt as well as pay for technology upgrades and building renovations.

Puerto Rico authority deal

Coming up on Wednesday is $350 million in series 2009 revenue bonds from the Puerto Rico Building Authority, according to a sales calendar.

The bonds will be sold through senior manager Merrill Lynch & Co. Inc.

Proceeds will be used to fund building costs throughout the commonwealth.

Memphis sale ahead

Looking to Tuesday's pricing activity, the Memphis and Shelby County Sports Authority of Tennessee is scheduled to price $138.11 million in series 2009 revenue refunding bonds on Tuesday, according to a sellside source familiar with the deal.

The bonds (A1/AA/A) will be sold through senior manager Morgan Stanley.

Proceeds will be used to construct the Memphis Arena for the Memphis Grizzlies, the city's basketball team.

Coming up, the Pennsylvania Higher Educational Facilities Authority is planning to sell $123.64 million in series AJ state system of higher education revenue bonds on June 30, said a preliminary official statement.

The bonds (Aa3/AA-/) will be sold competitively with RBC Capital Markets Corp. as the financial adviser.

The bonds are due 2010 to 2039.

Proceeds will be used to fund a campus revitalization project, including the demolition of old facilities and the construction of new buildings, as well as the maintenance of faculty buildings, dormitories, faculty apartments and a laboratory building.

Secondary market firms

Despite a lull in trading activity Monday, the market took a firmer tone, a trader said. Yields were seen lower by 1 to 2 bps on the long end of the yield curve, the trader said.

In specific trades, the Puerto Rico Sales Tax Financing Corp.'s recently priced series 2009A subordinated sales tax revenue bonds were seen moving. The 5% 2039 bonds were seen at 4.368% during Monday afternoon trading.

Elsewhere, the Atlanta's series 2009A water and wastewater revenue bonds were also moving. The 6.25% 2039s were seen at 6% after pricing at 6.38%. The 5.25% 2017 bonds were seen at 4.954%.

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