Municipal yields rise; correction might be in full swing; Florida Board of Education prices

By Sheri Kasprzak

New York, Sept. 9 - Municipals rounded out Thursday on a low note, with 10-year muni yields up about 7 or 8 basis points, said one trader reached in the afternoon.

"It's pretty dismal out there," he said.

"Ten years are up about 7, maybe 8 basis points. Twenty- and 30-year bonds are probably up 3 or 4 basis points. We're definitely seeing a correction. We've been falling for so long and we've reached rock bottom, and now we go back up."

Meanwhile, pricing action on Thursday was led by a downsized $223.425 million offering of lottery revenue refunding bonds from the Florida Board of Education. The board had originally planned to sell $245 million of the bonds, and the offering was on 18-hour notice to price sometime around Sept. 13.

"They could be going early because there's a sense that yields are going to start going up," said one sellsider who observed the deal.

"They cut the size, and they went early, so that's kind of telling to me that they might be a little skittish. I wonder if some other issuers might be feeling that same skittishness, so it will be interesting to see what happens in the next few weeks."

The bonds (A1/AAA/A+) are due 2012 to 2020 with coupons from 4% to 5%.

The bonds were sold competitively with Bank of America Merrill Lynch winning the bid.

Proceeds will be used to refund existing lottery revenue bonds.

Colorado Springs bonds price

Elsewhere during the pricing session, the City of Colorado Springs brought $139.835 million in series 2010A utility system refinancing revenue bonds, said a pricing sheet. That deal was upsized from $120.4 million.

The sale included $117.925 million in series 2010A-1 bonds and $21.91 million in series 2010A-2 Build America Bonds.

The 2010A-1 bonds are due 2011 to 2029 with term bonds due 2031 and 2033. Coupons range from 0.6% to 5%. The 2031 bonds have a 4% coupon priced at 99.29, and the 2033 bonds have a 4% coupon priced at 97.778.

The 2010A-2 bonds are due 2016 to 2024 with term bonds due 2030 and 2040. The coupons range from 2.781% to 4.646%, all priced at par. The 2030 bonds have a 5.267% coupon priced at par, and the 2040 bonds have a 5.467% coupon, also priced at par.

Piper Jaffray & Co. was the senior manager.

The city intends to use the proceeds to refinance existing debt used to construct, repair and maintain its utility system.

NYC water sale set

Looking to upcoming sales, the New York City Municipal Water Finance Authority is scheduled to bring to market $600 million in series 2011AA water and sewer system second general resolution revenue Build America Bonds.

Raymond Orlando, spokesman for the city's Office of Budget and Management, declined to comment on the offering's specifics, apart from saying that the deal is set to price on Sept. 16, assuming market conditions are favorable.

The bonds (Aa2/AA+/AA+) will be sold on a negotiated basis with Barclays Capital Inc. as the senior manager.

Proceeds will be used to repay existing commercial paper notes and make a deposit to the authority's construction fund.

The authority borrows money to fund or refund debt issued by the city to construct, maintain and repair water infrastructure.

SCPPA deal ahead

Also coming up, the Southern California Public Power Authority is expected to sell $140 million in series 2010 revenue bonds, said a preliminary official statement.

The authority's bonds for the Canyon Power Project, which priced back in May, were seen trading this week. The 5.25% 2027 bonds were trading on Tuesday at 3.43%. The 5% 2025s were seen late last week at 3.584%.

"It's hard to tell where the bonds will come, but I'm sure they'll probably price better than they did in May, just because yields in general are lower than they were in May," one sellsider said.

"I don't want to make any predictions, but it will probably go OK for them."

The sale will include both tax-exempt and Build America Bonds, but the exact breakdown was unavailable Thursday.

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

The authority will use the proceeds from the offering to finance the acquisition of the Linden Wind Energy Project in Klickitat County, Wash., as well as refund the authority's series 2009A bonds.

The Pasadena, Calif.-based authority operates and maintains electric energy projects.

Pennsylvania housing bonds ahead

In other news, the Pennsylvania Housing Finance Agency is expected to sell $354 million in series 2010 single-family mortgage revenue bonds as well as convert some of its series 2009 bonds, said a preliminary official statement.

The new bonds include $104 million in series 2010-109 AMT bonds and $250 million in series 2010-110 bonds. The 2010-110 bonds are comprised of $116.455 million in series 2010-110A AMT bonds and $133.545 million in series 2010-110B non-AMT bonds.

The 2010-109 bonds are due 2011 to 2021 with term bonds due 2025 and 2028. The 2010-110A bonds are due 2014 to 2021 with a term bond due 2025. The 2010-110B bonds are due 2011 to 2021 with term bonds due 2025, 2030, 2035 and 2039.

The underwriters for the 2010-109 bonds are Morgan Stanley and Janney Montgomery Scott LLC. The underwriters for the 2010-110 bonds are Barclays Capital and Bank of America Merrill Lynch.

Proceeds will be used to finance single-family mortgages.

Additionally, the agency intends to convert $156 million in series 2009-107B non-AMT bonds. The bonds will be converted to a short-term rate of 3.22% beginning Oct. 14 and ending Dec. 14. The bonds are due April 1, 2041.

Based in Harrisburg, the agency provides housing loans for older and low- to moderate-income families in the state.

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