Muni yields down 1 to 2 bps; sale calendar thins; Detroit schools to sell $198 million notes

By Cristal Cody

Tupelo, Miss., Aug. 6 - Municipal yields ended the week slightly lower, with short-term and longer maturities down 1 to 2 basis points.

The yields on maturities from 2014 out to 2032 were down 2 bps, while the yields on maturities from 2033 through 2040 were down 1 bp, according to the Municipal Market Data scale.

"The new issue supply was modest this week, and next week's supply is looking to be even lighter," said Alan Schenkel, managing director at Janney Montgomery Scott LLC. "The Phoenix Civic Improvement's $653 million is the only issue that's over a half billion dollars, so it's pretty meager pickings."

The City of Portland, Ore., has one of the largest sales set for the week ahead. The city intends to price $412.06 million in second-lien sewer system revenue bonds through a competitive sale on Tuesday, according to a preliminary official statement.

The series 2010A bonds (Aa3/AAA/) have serial maturities from 2011 through 2035.

Public Financial Management, Inc. is the financial adviser.

Proceeds will be used to finance capital facilities and improvements to the sanitary sewer and storm water drainage system and to repay a line of credit.

Tacoma to price

A few other issuers plan to bring smaller deals to the market in the upcoming week.

The City of Tacoma, Wash., plans to price $103.225 million in water system revenue bonds (Aa2/AA/) through a negotiated sale on Tuesday, according to a source with the city.

The sale includes $29.575 million in series 2010A revenue and refunding bonds and $73.65 million in series 2010B Build America Bonds.

The series 2010A bonds have serial maturities from 2012 through 2023, and the series 2010B bonds have term maturities due 2030 and 2040.

Citigroup Global Markets Inc. will manage the negotiated sale.

Proceeds will be used to finance capital improvements to the water system and to refund outstanding bonds if interest rates are favorable, according to a statement.

Because of the thin sale calendar, demand remains strong, Schenkel said.

"Mutual fund flows were up again last week to over $900 million for the fourth week in a row, so there's still strong demand and not much supply," Schenkel said. "New issuance is moderate, so that's pushing yields lower. It will probably stay about the same [in the week ahead], but it's getting so low I think we'll see buyer resistance at some point."

Short-term notes ahead

A couple of issuers plan to price short-term notes in the month ahead.

The Michigan Finance Authority intends to bring $198 million in state aid revenue notes for the School District of the City of Detroit, according to a preliminary official statement.

The series 2010E notes (/SP-1/) are due Aug. 22, 2011.

J.P. Morgan Securities Inc. and Loop Capital Markets, LLC will manage the negotiated sale.

The proceeds will be used to purchase a note issued by the school district.

In the other short-term offering, the City of Chicago intends to sell $70.425 million in general obligation notes, according to a preliminary official statement.

The series 2010 notes are due June 1, 2012.

BMO Capital Markets Corp. and Grigsby & Associates, Inc. will manage the negotiated sale.

Proceeds will be used for the Chicago Public Library maintenance, operation and building funds.

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