Demand remains strong as new issues hit market; Temple University brings $200 million of bonds

By Sheri Kasprzak

New York, Sept. 18 - Municipals responded positively to a new flood of offerings after nearly a month of supply drought, market insiders reported.

"Supply seems to actually be catching up to demand, so that's been helpful for us today," one trader said.

"Treasuries are also seeing some strength today, and we're buoyed a bit by that. The new supply has been a definite help. It's hard to say if or when supply pressure might become an issue, but I think we've been lacking enough supply for so long that this new crop will be well absorbed."

Elsewhere, spending cuts could impact $4.2 billion of subsidy payments for 2013 for issuers under the Build America Bond program, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"The specifics of the automatic spending cuts in the Office of Management and Budget's Congress report on sequestration include a portion of the federal subsidies to issuers under the Build America Bond program," Schankel wrote Tuesday.

"The $4.2 billion of subsidy payments for 2013 could be cut by 7.6%, or $322 million. A reduction in these payments would not impact issuers' obligations to bondholders, but smaller issuers with outstanding BABs could experience some financial stress."

Temple University bonds price

Looking to Tuesday's primary action, the Pennsylvania Higher Educational Facilities Authority sold $200 million of series 2012 revenue bonds for Temple University, said a pricing sheet.

The bonds (Aa3/A+/) were sold through Citigroup Global Markets Inc.

The bonds are due 2013 to 2032 with term bonds due in 2035 and 2042. The serial coupons range from 1% to 5%. The 2035 bonds have a 5% coupon and priced at 112.286, and the 2042 bonds have a 5% coupon and priced at 110.75.

Proceeds will be used to finance or reimburse the university for the construction, equipment, acquisition and renovation of residence halls and a food service facility, a science, research and education center and a library, as well as the construction of a new football facility and other capital improvements.

MTA preps $1 billion sale

Moving to Wednesday, the largest sale of the week is slated to price. The Metropolitan Transportation Authority of New York is scheduled to price $1 billion of series 2012F transportation revenue refunding bonds (A2/A/A) through Morgan Stanley & Co. LLC, Duncan-Williams Inc. and Ramirez & Co. Inc.

The authority plans to use the proceeds to refund existing MTA revenue bonds.

In early July, the authority sold $1.26 billion of transportation revenue refunding bonds. Those bonds are due from 2015 to 2032 with 3% to 5% coupons and 1% to 4.04% yields.

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