Munis finish out a heavy-duty week flat; week ahead thins as Texas preps $5.5 billion sale

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, Aug. 21 - Despite a jam-packed primary calendar during the week, the municipals secondary market failed to gain any ground, and that trend continued Friday, said market insiders.

"It has been really quiet," one trader said.

"The short end of the yield curve is especially quiet, but the longer end seems to be maybe a basis point or two better."

In the secondary market, the Illinois series 2009 general obligation certificates were moving. The 2% certificates due March 2010 were seen at 0.576% after pricing Thursday at 0.77%. The 2% certificates due April 2010 were trading at 0.65% after pricing at 1.06%, and the 2% certificates due June 2010 were seen at 1% after pricing at 1.15%.

Elsewhere, the recently priced Regents of the University of California Build America Bonds were also seen in action. The 6.27% bonds due 2031 were seen trading at 5.97% after pricing Wednesday at par.

Despite a high for dollar volume in the primary market, the calendar was noticeably thinner apart from a few billion-dollar sales. This trend is likely to persist, said Tom Kozlik, a municipal credit analyst with Janney Montgomery Scott LLC.

"Once we get out of August, business is going to start to pick up a little more," Kozlik said.

The encouraging assessment from Federal Reserve chairman Ben Bernanke seemed like a genuine assessment of the overall picture, Kozlik said.

"[But] how does that translate into jobs?" he asked.

The greater concern to the municipal market is whether or not states' and cities' revenue bonds are supported and issuers can service their debt, he said.

"What I'm waiting for are positive reports about tax revenue and employment," he said.

Still, both the week's positive data and Bernanke's assessment are "a step in the right direction," he said.

Texas, M-S-R Energy to sell billions

The largest deal of the year is set to price in the coming week.

The State of Texas is gearing up to price $5.5 billion in series 2009 tax and revenue anticipation notes on Tuesday, said a notice of sale released Thursday.

The notes (MIG 1/SP-1+/F1+) will be sold on a competitive basis with RBC Capital Markets Inc. as the financial adviser.

The TRANs are due Aug. 31, 2010.

Proceeds will be used to fund general capital expenses ahead of the collection of some taxes and revenues.

Another billion-dollar sale comes Thursday from the M-S-R Energy Authority of California. The authority plans to bring to market $1,015,855,000 in series 2009 gas revenue bonds, said a calendar of upcoming deals.

The offering includes $199.965 million series 2009A bonds, $497.21 million series 2009B bonds and $318.68 million series 2009C bonds.

Proceeds will be used to finance the prepayment of a natural gas agreement.

Dasny plans $244.4 million

In other upcoming sales, the Dormitory Authority of the State of New York is set to sell $244.395 million in series 2009A revenue bonds for the North Short-Long Island Jewish Obligated Group on Wednesday, according to a sales calendar.

The bonds (Baa1/A-/A-) will be sold through lead managers Citigroup Global Markets Inc. and Morgan Stanley & Co. Inc.

Proceeds will be used to construct a new patient tower at Long Island Jewish Medical Center and to make improvements at the North Shore University Hospital.

Elsewhere during the week, Miami-Dade County in Florida is set to sell $183.785 million in series 2009 capital asset acquisition special obligation bonds Wednesday, said a sales calendar.

The bonds (A1/A+/) will be sold through senior manager Raymond James & Associates Inc.

Proceeds will be used to construct, acquire and develop capital projects in the county as well as make a deposit to a debt service reserve fund.

Wisconsin Electric pulls plug

In other municipals news Friday, Wisconsin Electric will postpone its planned $147 million issue until market conditions become more favorable, according to treasurer Jeffrey West.

West noted that taxable and tax-exempt rates were too similar and the power provider intends to wait until tax-exempt rates are more advantageous.

The firm is well capitalized and does not have a deadline to re-enter the market.

The deal was expected to restructure outstanding variable-rate bonds into fixed-rate bonds.

Merrill Lynch & Co. was slated to act as underwriter for the negotiated deal scheduled for the week of Aug. 24.

Wisconsin Electric is located in Milwaukee.

Tennessee Housing bonds ahead

The Tennessee Housing Development Agency will sell $75 million in series 2009-2 homeowners program bonds (Aa1/AA+ expected/) on Thursday, according to Wayne Beard, director of finance.

The bonds will carry serial maturities from 2010 to 2021 with term bonds due 2024 and 2027. A PAC bond will be due 2030.

The issue does not come as an emergency.

"We need the proceeds to make mortgages," Beard said.

Merrill Lynch will act as underwriter for the negotiated deal.

Proceeds will be used to offer home loans.

The agency is located in Nashville.

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