Municipals round out week with record low yields; New York's MTA sells $350 million bonds

By Sheri Kasprzak

New York, Nov. 9 - Municipal yields were once again firmer, even as Treasuries reversed direction early in the session, traders reported.

"Tax-free benchmark yields moved to new lows ... with the 10-year finishing at 1.57% and the 30-year dropping to 2.69%," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

About $6.7 billion of new issues are expected in the week ahead, despite the fact that the week will be shortened by the Veterans Day holiday.

MTA sees good reception

Meanwhile, the Metropolitan Transportation Authority of New York came to market with $350 million of series 2012H transportation revenue bonds, according to a term sheet.

The bonds were sold through Siebert Brandford Shank & Co. LLC, Duncan-Williams Inc. and Rice Financial Products Co.

The bonds are due 2013 to 2034 with term bonds due in 2037 and 2042. The serial coupons range from 2% to 5%. The 2037 bonds have a 3.625% coupon priced at par, and the 2042 bonds have a 5% coupon priced at 113.922.

Investor demand for the bonds was strong enough to warrant yield revisions, said Schankel.

In the 10-year maturity, yields dropped by 10 basis points to 2.33% and yields in 30 years dropped by 16 bps to 3.35%.

"MTA operations and infrastructure were heavily impacted by Hurricane Sandy, but the expectation is that most repair expense will be covered by federal and state sources as well as insurance," said Schankel.

"Orders for bonds of this essential purpose transaction issuer for NYC were strong, indicating that the market sees minimal longer-term impact."

Proceeds will be used to finance transit and commuter projects for the authority.

MTA to 'weather challenges'

In related news, Fitch Ratings released a report stating that issuers, including the MTA, that were impacted by Hurricane Sandy will most likely weather short-term challenges.

However, longer-term concerns could add to capital expenditures. Specifically, issuers are seeking to harden assets in order to meet expenses, and this could lead to borrowing and put downward pressure on ratings, Schankel said.

Tennessee G.O.s ahead

Leading competitive action for the week ahead, the State of Tennessee plans to price $170,545,000 of series 2012 general obligation bonds.

The deal includes $140 million of series 2012B G.O.s and $30,545,000 of series 2012C taxable G.O. refunding bonds.

Proceeds from the bonds (Aaa/AA+/AAA) will be used to finance capital projects in the state, retire commercial paper and refund the state's series 2005A G.O. bonds.

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