Municipals firm 10 years and out as new issues well-received; Tennessee G.O. bonds price

By Sheri Kasprzak

New York, Nov. 14 - Municipals were seen better on Wednesday as Treasuries got a boost and new offerings received a good reception, market sources reported.

"There's some definite firming outside of 10 years," said one trader.

"New issues are pricing and are coming in at solid levels. Investor demand is still good."

Demand might be good, but one trader noted that there is a supply/demand balance, and this is leading to some tax-exempt deals to get bumped. There's a dearth of bonds in secondary, and this seems to be driving the market, the trader said.

Meanwhile, a new offering that was previously postponed could raise the $10.9 billion new-issue slate substantially. The State of New Jersey will price $2.6 billion of tax and revenue anticipation notes. The offering was held off by Hurricane Sandy.

"Unlike last year, when the NJ note issue received top ratings from all three agencies, this year's issue is one notch from the top at MIG1, SP-1 and F1," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Tennessee brings G.O.s

Moving to those new issues Wednesday, the State of Tennessee brought $170,525,000 of series 2012 general obligation bonds, according to a pricing sheet.

The deal included $140 million of series 2012B G.O. bonds and $30,525,000 of series 2012C taxable G.O. refunding bonds.

The 2012B bonds are due 2013 to 2032 with 2.25% to 5% coupons. The 2012C bonds are due 2013 to 2020 with 0.30% to 1.60% coupons, all priced at par.

The bonds (Aaa/AA+/AAA) were sold competitively. Bank of America Merrill Lynch won the series 2012B bonds with a 2.11% true interest cost, and FTN Financial Capital Markets won the series 2012C taxable portion with a 1.37% TIC, said Mary-Margaret Collier, debt manager for the state.

"The state has the option to sell at either competitive or negotiated sale," said Collier in an interview.

"These bonds were sold at competitive sale because they were a plain vanilla deal, the credit is strong and because we believed that there would be a strong market for the bonds. The state has not sold G.O. bonds since last February."

Proceeds will be used to finance capital projects in the state, retire commercial paper and refund the state's series 2005A G.O. bonds.

NYC Transitional deal ahead

Looking to Wednesday, the New York City Transitional Finance Authority is scheduled to price $854.83 million of series 2013 future tax secured subordinate bonds in five tranches.

The bonds will be sold competitively.

Proceeds from the deal will be used to finance general city expenditures, as well as to finance the construction and equipment of schools and refund some of the authority's existing debt.

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