Munis close flat as yields leave retail unimpressed; California springs $5.4 billion on market

By Sheri Kasprzak

New York, July 26 - Municipals were mostly flat at the close on Tuesday as low yields left retail investors with something to be desired and supply tapered off from the previous week, said traders.

"It's getting tougher to get retail interested," said one trader reached during the session.

"Yields are too low for them to really jump in. They're waiting on the sidelines. Plus, there's not as much going on [this week]."

Meanwhile, the State of California came to market unexpectedly Tuesday with $5.4 billion of series 2011 revenue anticipation notes.

The notes are due Nov. 22, 2011 and bear interest at 0.237%. They priced at par, according to a statement from California treasurer Bill Lockyer's office.

The notes were sold competitively. Goldman Sachs & Co. took $1.473 billion, Wells Fargo Securities LLC won $1.473 billion, Citigroup Global Markets Inc. won $736.365 million, Barclays Capital Inc. took $490.91 million, J.P. Morgan Securities LLC won $490.91 million, Bank of America Merrill Lynch took $245.455 million, Morgan Stanley & Co. LLC won $245.455 million, and US Bank took $245.455 million.

Response to budget crisis

The move was made, Lockyer said in the statement, to help California cope with the possible failure in Washington, D.C., to raise the federal debt ceiling by Aug. 2.

"California had to obtain this interim financing to protect the state from immediate, drastic consequences of a failure by Washington to resolve the debt ceiling impasse by the Aug. 2 deadline," Lockyer said in the statement.

"I'm hopeful Congress and the president will do the responsible thing, solve the problem before it's too late and not risk pushing the country into a financial and economic abyss."

Lockyer noted in the statement that the state had intended to come to market with the note sale in late August.

Proceeds from the sale will be used to finance capital requirements should the debt ceiling crisis not be resolved by Aug. 2, said the statement.

Texas Public Finance prices

Elsewhere, the Texas Public Finance Authority priced Tuesday $282.82 million of series 2011 taxable general obligation and refunding bonds, said a pricing sheet.

The bonds were sold through senior manager Jefferies & Co.

The bonds are due 2012 to 2031 with 0.4% to 5.116% coupons.

Proceeds will be used to make grants to the Cancer Prevention and Research Institute of Texas and to refund existing commercial paper held by the institute.

Houston brings bonds

Also during the day, the City of Houston sold $254.46 million series 2011 hotel occupancy tax and special revenue refunding bonds, said a pricing sheet.

The deal included $116.735 million of series 2011A bonds and $137.725 million of series 2011B bonds.

The 2011A bonds are due 2012 to 2033 with 1.5% to 5.25% coupons. The 2011B bonds are due 2012 to 2033 with 1.5% to 5.25% coupons.

The bonds (A2/A-/) were sold through Piper Jaffray & Co.

Proceeds will be used to refund auction-rate bonds and to refund the city's series 2001A hotel occupancy tax and special revenue bonds.

Delaware utility bonds price

The Sustainable Energy Utility of Delaware priced $67.435 million of series 2011 energy efficiency revenue bonds, said a term sheet.

The bonds (Aa2/AA+/) were sold through Citigroup.

The bonds are due 2013 to 2031 with a term bond due in 2034. The serial coupons range from 2% to 5%. The 2034 bonds have a 5% coupon priced at 103.612.

Proceeds will be used to design, construct and install energy conservation measures.

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