Municipals relatively unmoved in another quiet session; Philadelphia brings $240.76 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, July 28 - It was another quiet day for municipals, with little going on in primary - and even less going on in the secondary market, market insiders reported.

"We're not moving a whole lot," said one trader reached in the afternoon.

"Looks pretty quiet. The tone, I'd say, is basically unchanged. We're just kind of stuck in a summer lull."

Another trader was more abrupt.

Tuesday's trading was a real "flatline," said the trader.

However, the day was not completely wasted.

In California, governor Arnold Schwarzenegger signed the new budget proposals passed by the legislature, which included cuts to "the good, the bad and the ugly," reported the Sacramento Bee.

The cuts are expected to be enough to balance the budget until June 30, 2010.

"There's some tightening in Cal," the trader said, and "there's inquiries."

However, it is too early to determine if the new budget will set the state on a path to full recovery, the trader said.

Even Schwarzenegger agreed.

"We are not out of the troubled waters yet," he said in the Sacramento Bee report.

"We are ready if our revenues drop further to make the necessary cuts to again live within our means," he said.

Meanwhile, many Democrat lawmakers have vowed to replace money taken from health care and welfare programs.

"We will fight to restore every dollar of additional cuts to health and human services," California senate president pro tem Darrell Steinberg said in a statement.

Philadelphia bonds price

In primary Tuesday, the City of Philadelphia came to market with $240.755 million in series 2009A general obligation fixed-rate refunding bonds, according to a sellside source. Pricing may have gone a little cheap, even for the city's low rating, according to one market insider.

"Philly, of course, sports a relatively low underlying rating (Baa1/BBB) for a major city, and although the bonds were FSA insured to Aa2/AAA, the sale definitely went at cheaper prices than for issuers with less in the way of budgetary overhangs," said Guy LeBas, chief fixed income strategist with Janney Montgomery Scott LLC.

"The 10-year bonds repriced at a 4.5% [yield], while the longest maturities (2031) priced to a 5.5% yield. Both the shorter and longer bonds offered were gobbled up by substantial retail interest, while the middle maturities went institutional, with pricing largely as anticipated."

The bonds (Baa1/BBB/BBB+) were sold through lead manager Merrill Lynch & Co. Inc. and are due 2019 to 2031 with coupons from 4.25% to 5.45% and yields from 4.5% to 5.5%.

Proceeds from the sale will be used to refund the city's series 2007B bonds.

Cobb County, Ga., sells $126 million

Elsewhere in the primary market Tuesday, Cobb County in Georgia sold $126.6 million in series 2009 water and sewerage revenue bonds Tuesday, said a sellside source connected to the deal.

The bonds (Aaa/AAA/AAA) were sold competitively with Merrill Lynch taking the bid with a 3.74% true interest cost.

The bonds are due 2010 to 2029 with coupons from 4% to 5% and yields from 0.94% to 4.33%.

Proceeds from the sale will be used to improve the county's water distribution line, construct the South Cobb sewer tunnel and make upgrades to the South Cobb water reclamation facility.

The county seat is Marietta, Ga.

Indianapolis leads Wednesday's sales

Looking ahead to Wednesday's loaded primary calendar, the Indianapolis Local Public Improvement Bond Bank heads up the action, bringing to the table $568.715 million in series 2009A waterworks bonds.

The bonds (A3/AA-/A-) will be sold through senior manager Morgan Stanley & Co. Inc.

Maturities range from 2011 to 2024 with term bonds due 2029 and 2038.

Proceeds will refund the bond bank's series 2004A, 2005G and 2005H bond, as well as make a deposit to a reserve fund.

Houston to sell two

In other action Wednesday, the City of Houston plans to sell two large bonds. The city is expected to bring to market $490.81 million in series 2009 public improvement refunding bonds (Aa3/AA/) through Loop Capital Markets LLC and $420 million in series 2009A airport system senior-lien revenue and refunding bonds (Aa3/AA-/) through J.P. Morgan Securities Inc.

Proceeds from the public improvement refunding bonds will be used to refund commercial paper notes and existing public improvement bonds, and the proceeds from the airport bonds will be used to refund outstanding airport system bonds and reimburse the city for improvements made to the airport.

Secondary action quiet

Moving to the secondary market, traders Tuesday reported very little activity.

Among the light trading action, the Palestine Independent School District of Texas saw some interest in its recently priced school building bonds. The 5% 2034 bonds were seen trading at par. The 5.5% 2025s were seen at 4.3%, and the 2.5% 2011s were seen at 1.22%.

Elsewhere, the South Jersey Transportation Authority's series 2009A-5 Build America Bonds were also moving. The 7% 2038 bonds were seen at 6.958%.

In other trading news, King County, Wash.'s sewer revenue bonds were seen trading. The 5% 2039s were seen Tuesday afternoon at 5.018%. The bonds priced Monday at 5.22%. On the short end, the 4% 2013 bonds were seen at 1.61%, the same as pricing.

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