Muni yields remain mostly unmoved as primary remains light; Texas Tech offers $190.83 million

By Sheri Kasprzak

New York, Jan. 5 - Municipals were largely unchanged on Thursday, and investor demand just couldn't be satisfied by the meager offerings on the calendar.

The most movement was seen inside one year, where yields were down about 4 basis points. Elsewhere, 10-year yields were down about 2 bps. Yields were either up or down about a basis point throughout the rest of the yield curve, said one trader reached late in the afternoon.

"There's just so little going on that the market is really not moving by that much," the trader said.

"We were firmer a bit early in the session, but we're really kind of flat at this point."

Texas Tech leads action

Heading up the slight primary activity, the Texas Tech University System priced $190.83 million of series 2012 revenue financing system refunding and improvement bonds, said a pricing sheet.

The deal included $163.24 million of 14th series A tax-exempt bonds and $27.59 million of 15th series B taxable refunding bonds.

The series A bonds are due 2012 to 2032 with term bonds due in 2037 and 2041. The serial coupons range from 2% to 5%. The 2037 bonds have a 5% coupon and priced at 119.304, and the 2041 bonds have a 4% coupon and priced at 98.634.

The series B bonds are due 2012 to 2027 with a term bond due in 2031. The serial coupons range from 0.4% to 4.04%, all priced at par. The 2031 bonds have a 4.44% coupon and priced at par.

Rates were 'attractive'

Jim Brunjes, the university system's chief financial officer, said in an interview Thursday that the university does not come to the market often.

"We have a short-term financing system that provides us cash in the interim," Brunjes explained.

"It lasts from 90 to 270 days, and we can roll that forward. We are never forced to go out on a bond sale. We typically go every two to three years. It helps us on our fixed costs."

The last time the university went to market was in February 2009. The true interest cost for the tax-exempt portion of the offering was 3.2%, a whole percentage point lower than its previous bond issuance. The taxable TIC was 3.8%.

"Our rates were less than we were expecting when we started this process six months ago," Brunjes said.

"The market has been incredibly stable, especially compared to back in November to December, with the European crisis and all the other crises."

In addition to getting a good rate, Brunjes said the offering was oversubscribed by about four times on both tranches.

RBC Capital Markets LLC and Wells Fargo Securities LLC were the senior managers.

Proceeds will be used to acquire, purchase, construct, renovate, improve, enlarge and equip property, buildings, structures, facilities, roads or related infrastructure for the university system as well as refund certain outstanding commercial paper notes and outstanding parity obligations.

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