Munis end flat to firmer in spots; Texas Transportation sells upsized $1.26 billion G.O. bonds

By Sheri Kasprzak

New York, Oct. 2 – Municipals were mostly flat to close out the session Thursday with some firmness indicated in intermediate maturities, traders said in the afternoon.

Around 20 years, yields were seen lower by around a basis point, a trader said late in the session. Elsewhere, yields held steady, shaking off some weakness seen in Treasuries after a major rally Wednesday.

The new-issue market was the focus of the day with investors clamoring for the Texas Transportation Commission’s massive offering of highway improvement general obligation bonds.

Texas sells highway debt

The offering was so popular that it was upsized to $1.26 billion from $1.1 billion, and spreads on the deal came in tighter than expected, a trader said.

The bonds are due 2015 to 2036 with term bonds due in 2039 and 2044. The serial coupons range from 2% to 5% with 0.09% to 2.97% yields. The 2039 bonds have a 5% coupon and priced at 116.098 to yield 3.03%, and the 2044 bonds have a 5% coupon and priced at 115.475 to yield 3.10%.

The bonds (Aaa/AAA/AAA) were sold through J.P. Morgan Securities LLC, and the commission plans to use the proceeds to finance or reimburse the Texas Highway Fund for highway capital improvement projects.

Connecticut brings bonds

Another major transportation offering hit the market Thursday. Connecticut offered up $731,545,000 of series 2014 transportation infrastructure special tax obligation bonds. This deal was upsized from $730 million.

The deal included $600 million of series 2014A bonds and $131,545,000 of series 2014B refunding bonds, according to the term sheet.

The 2014A bonds are due 2015 to 2034 with 2% to 5% coupons and 0.11% to 3.20% yields.

The 2014B bonds are due 2017 to 2025 with coupons from 3% to 5% and yields from 0.65% to 2.52%.

After the bonds were freed to trade in the afternoon, the 5% 2025s were trading lower. At the end of the session, the yield had climbed to 2.699% after pricing at 2.52%.

The bonds (/AA/AA) were sold through senior manager Raymond James/Morgan Keegan with BofA Merrill Lynch, Citigroup Global Markets Inc., Goldman Sachs & Co., RBC Capital Markets LLC and Siebert Brandford Shank & Co. LLC as the co-senior managers.

Proceeds will be used to finance the construction, reconstruction, improvement and repair of state highways and other transportation projects and to refund existing transportation bonds.

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