Municipals improve as new deals hit the market; California Water sells $367.07 million bonds

By Sheri Kasprzak

New York, Sept. 19 - Demand for municipals prompted a rally on Wednesday as new offerings came to market, traders reported.

Treasuries improved, and the increased supply was enough to meet investor demand, said one trader.

"We went through a fairly extended dry spell, but more supply is coming through, and investors are responding positively to that."

Secondary action was fairly light during the day, but primary activity was enough to fuel a rally, said a trader. Meanwhile, spreads on new issues were a bit tighter than traders expected.

That new supply could continue to grow, with preliminary estimates for the coming week's issuance at $11.7 billion.

Temple yields adjust downward

Among the day's deals, the Pennsylvania Higher Educational Facilities Authority's $200 million of series 2012 revenue bonds sold Tuesday for Temple University saw downward price adjustment, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

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 priced at 112.286 and the 2042 bonds have a 5% coupon priced at 110.75.

Yields were adjusted downward by 4 to 15 basis points, said Schankel on Wednesday.

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 state-of-the-art library, as well as the construction of a new football facility and other capital improvements.

California water bonds price

The California Department of Water Resources priced $367,065,000 of series 2012 Central Valley Project water system revenue bonds, said a pricing sheet.

The bonds (Aa1/AAA/) were sold through Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and Siebert Brandford Shank & Co. LLC.

The deal included $49.7 million of series AN bonds and $317,365,000 of series AO bonds.

The series AN bonds are due 2013 to 2032 with a term bond due in 2035. The serial coupons range from 2% to 5%. The 2035 bonds have a 5% coupon priced at 117.521. The series AO bonds are due 2015 to 2029 with coupons from 0.65% to 3.5%, all priced at par.

Proceeds will be used to refund the department's Central Valley Project series AC and AD bonds issued in 2005.

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