Yields firm as largest deals of week price; Washington sells $591.42 million; Illinois prices

By Sheri Kasprzak

New York, July 18 - Municipal yields continued their winning streak on Wednesday as the week's largest offerings hit the market, insiders said.

"Illinois looks to be doing very well, getting some good reception straight out of the gate," said a trader reached early in the afternoon.

"That's really driving the market, along with a few larger deals pricing today. It seems like this is an early week for us. Lots of primary activity early on, so I'm curious to see how the end of the week will pan out since yields seem to be very sensitive to supply right now."

Illinois came to market Wednesday with the largest deal of the week. It priced $1,363,675,000 of series 2012 unemployment insurance fund building receipts revenue bonds in three tranches.

The state sold $648,535,000 of series 2012A bonds, $542,735,000 of series 2012B bonds and $172,405,000 of series 2012C bonds.

The 2012A bonds are due 2013 to 2016 with 2% to 5% coupons. The 2012B bonds are due 2017 to 2020 with 4% to 5% coupons. The 2012C bonds are due June 15, 2021 with a 1.5% coupon.

The bonds (/AA/AA+) were sold through J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Loop Capital Markets LLC and Bank of America Merrill Lynch.

Proceeds will be used to repay advances on the state's unemployment trust fund within the federal unemployment trust fund and to pay state unemployment benefits.

Washington's $591.42 million

In other major pricings, the State of Washington brought to market $591,415,000 of series 2013 general obligation bonds, said a pricing sheet.

The offering included $273.46 million of series 2013A various purpose G.O. bonds, $167,565,000 of series 2013B-1 motor vehicle fuel tax G.O. bonds, $31.51 million of series 2013B-2 motor vehicle fuel tax G.O. bonds, $40,585,000 of series 2013T taxable G.O. bonds and $78,295,000 of series R-2013T taxable G.O. refunding bonds.

The 2013A bonds are due 2018 to 2037 with 4% to 5% coupons.

The 2013B-1 bonds are due 2013 to 2037 with a term bond due in 2042. The serial coupons range from 2% to 5%. The 2042 bonds have a 4% coupon and priced at 102.909.

The 2013B-2 bonds are due 2013 to 2025 with term bonds due in 2027, 2029, 2032, 2035, 2037 and 2042. The serial coupons range from 2% to 5%. The 2027 bonds have a 3% coupon and priced at 99.64, and the 2029 bonds have a 3.125% coupon and priced at 99.282. The 2032 bonds have a 3.25% coupon and priced at 98.121. The 2035 bonds have a 4% coupon and priced at 105.744, and the 2037 bonds have a 3.625% coupon and priced at 99.429. The 2042 bonds have a 3.625% coupon and priced at 98.469.

The 2013T bonds are due 2013 to 2018 with 0.35% to 1.2% coupons. They all priced at par.

The R-2013T bonds are due 2013 to 2016 with 0.17% to 0.60% coupons. All of the bonds except for the 2016 bonds priced at par. The 2016 bonds have a 0.60% coupon and priced at 99.83.

The 2013A, 2013B-1, 2013T and R-2013T bonds were all sold on a competitive basis. The 2013B-2 bonds were sold on a negotiated basis with Bank of America Merrill Lynch as the senior manager. Citigroup Global Markets Inc. won the bid for the 2013A bonds at a 3.2793% true interest cost. Bank of America Merrill Lynch took the 2013B-1 bonds at a 3.4764% TIC and the 2013T bonds at a 0.8576% TIC. J.P. Morgan Securities LLC won the R-2013T bonds at a 0.49086% TIC.

Proceeds from the bonds (Aa1/AA+/AA+) will be used to finance various capital projects, state and local water supply improvements, multimodal transportation projects, state programs for Columbia River Basin water supply development, outdoor recreation, habitat conservation, riparian and farmland preservation, state and local highway improvements, construction of new transportation projects and to refund existing G.O. debt.

One tranche sold negotiated

Despite the fact that most of the tranches of the Washington deal were priced competitively, the state chose to price its $31.51 million of series 2013B-2 motor vehicle fuel tax G.O. bonds on a negotiated basis.

"We sold them on a negotiated basis to facilitate a retail order period for local investors," said Chris McGann, spokesman for the state treasurer's office.

"We sold about $31 million on the retail pricing Monday."

The competitive offering followed the second retail sale offered by the state since Treasurer James McIntire took office, McGann said. All qualified orders placed by Washington state residents were filled, he noted.

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