Munis weaken along with Treasuries; NJ Transportation Trust Fund plans $474 million Wednesday

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, May 26 - Municipals started off the shortened week a bit weaker as Treasuries took a hit.

"We're basically down with Treasuries," one trader said. "I'd say about two to three basis points off, pretty much across the yield curve."

Investors returned to their desks shaking off the holiday weekend while Treasury yields were still climbing, and neither helped the municipal market.

"The appetite is not there," said Anthony Shields, vice president of investment bank Grigsby & Associates, Inc.

"There's a pretty big supply cloud hanging over the market and demand seems to have evaporated."

The confluence of high supply and low demand has also intertwined with questions of moral hazard in California, he said.

"We don't know what's going to happen with California," he said. "Their problems are going to be looming in the corner [for perhaps] two or three months before they get any satisfaction."

If Sacramento is able to negotiate its own bailout from Washington, D.C., "every other state is going to want a federal backstop," he said.

"I don't see good things in the future," he said, and other investors are likely "to stay out of the market until this is resolved."

NJ transportation bonds

Coming up this week, the New Jersey Transportation Trust Fund is set to price $474 million in series 2009 transportation system bonds on Wednesday, said a calendar of upcoming deals.

The offering includes $224 million in series 2009A tax-exempt bonds and $250 million in series 2009B Build America Bonds.

The bonds (//A+) will be sold on a negotiated basis with Merrill Lynch & Co. as the senior manager.

Proceeds will be used to fund capital improvements to the state's transportation system.

Another sale this week comes out of New Jersey. The New Jersey Economic Development Authority is scheduled to price $186.8 million in series 2009AA school facilities construction refunding bonds Thursday, said a calendar of upcoming deals.

The bonds (//A+) will be sold through senior manager Morgan Stanley & Co. Inc.

The proceeds will be used to refund existing bonds used for school construction projects.

Houston Metro sale

Also on Thursday, the Houston Metropolitan Transportation Authority is coming to market with $180 million in series 2009 sales tax revenue bonds on Thursday, said a calendar of upcoming deals.

The bond (Aa3/AA/) will be sold on a negotiated basis with Merrill Lynch as the senior manager.

Proceeds will be used to fund improvements to the city's transportation system.

Yet another sale set for Thursday comes from the New York City Industrial Development Agency. The agency plans to price $70 million in series 2009 special revenue refinancing bonds for the New York Stock Exchange project, said a sales calendar.

The bonds (A1) will be sold through senior manager Ramirez & Co.

Proceeds will be used to refund the agency's series 2004A bonds, which were issued to amortize site acquisitions and planning costs incurred with the cancelled plan to expand the New York Stock Exchange.

Wisconsin HEFA sale

Coming up on Wednesday, the Wisconsin Health and Educational Facilities Authority is scheduled to price $127.39 million in series 2009 revenue bonds, said a sellside source familiar with the deal.

The bonds will be sold on a negotiated basis with Merrill Lynch as the senior manager.

The sale includes $90 million in series 2009A bonds and $37.39 million in series 2009B bonds.

The 2009A bonds are due 2011 to 2024 with term bonds due 2029 and 2038. The 2009B bonds are due 2009 to 2029.

Proceeds will be used to construct, equip and renovate health-care facilities and make a deposit to a debt service reserve fund.

Jefferson Parish's $110 million

Sometime during the week, the Jefferson Parish Sales Tax District, La., will sell $110 million in refunding bonds and $50 million in Build America Bonds (Aa2/AAA/), according to parish bond counsel Gunther Michaelis.

Morgan Keegan & Co. Inc. will act as underwriter for the negotiated bonds.

Maturities will not exceed Dec. 1, 2022.

The parish seat is Gretna.

June 2 a busy day

Looking a little further out, June 2 is gearing up to be a busy day for new-issue municipal bonds. The day's calendar includes a $156.605 million sale of series 2009 sewer revenue bonds from Fairfax County in Virginia, according to a preliminary official statement.

The bonds (Aa2/AAA/AAA) will be sold on a competitive basis with Public Financial Management Inc. as the financial adviser.

The bonds are due 2010 to 2039.

Proceeds will be used to pay for upgrades to the wastewater treatment system. The rest will be used to make a deposit to a reserve subfund.

The county seat is Fairfax.

The calendar also includes an offering from the Board of Regents of the University of Houston System, which is set to price $73.91 million in series 2009A consolidated revenue and refunding bonds on June 2, said a preliminary official statement.

The bonds (Aa3/AA-/) will be sold competitively with First Southwest Co. as the financial adviser.

The bonds are due 2010 to 2034.

Proceeds will be used to construct, acquire, improve, purchase or enlarge facilities within the university system as well as refund existing notes.

Washington sale ahead

Also coming up, the State of Washington is expected to price $391.3 million in series R-2010A various purpose general obligation refunding bonds on June 9, said a notice of sale.

The bonds will be sold on a competitive basis with Seattle-Northwest Securities Corp. as the financial adviser.

The bonds are due 2010 to 2024.

Proceeds will be used to refund existing debt.

Secondary market weakens

In line with Treasuries, the municipals secondary market was seen weaker by as much as 2 to 3 bps, said traders. Volume was also seen lighter than average as the market got back down to business following the Memorial Day holiday.

In specific trades, the Maine Educational Loan Authority saw its series 2009A-2 student loan bonds moving Tuesday. The 3.5% 2014 bonds were seen at 3.25%. The bonds priced last week at par.

Elsewhere, the University of Pittsburgh Medical Center's series 2009A revenue bonds were seen in action. The 5% 2023 bonds were seen at par.

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