Munis Firmer; ESDC Sells $521 Million

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The municipal market was firmer yesterday as New York’s Empire State Development Corp. came to market with a $521 million deal.

Citi priced $520.7 million of state personal income tax revenue bonds for the ESDC in two series. Bonds from the larger series of $486.7 million mature from 2008 through 2027, with yields ranging from 2.80% with a 4% coupon in 2009 to 4.11% with a 5% coupon in 2027. The bonds are callable at par in 2017. Bonds from the smaller series of $34 million are taxable, and mature from 2008 through 2017. The bonds are rated AAA by Standard & Poor’s and AA-minus by Fitch Ratings.

Traders said tax-exempt yields were lower by three or four basis points.

“The market has a pretty good bid to it now,” said a trader in New York. “People are looking for high grades and there is some demand out on the curve. There aren’t that many bonds around and not much new issue.”

The Treasury market, however, showed some losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.78%, finished at 3.83%. The yield on the two-year note was quoted near the end of the session at 2.73%, after opening at 2.68%.

The economic calendar was inactive yesterday, though potentially market-moving data will be released today. Initial jobless claims for the week ended Jan. 5 and continuing jobless claims for the week ended Dec. 29 will be announced, along with November wholesale inventory and November wholesale sales.

Economists polled by IFR Markets are predicting 340,000 initial claims, 2.75 million continuing claims, gains in wholesale inventory of 0.3%, and 0.3% growth in wholesale sales.

Also yesterday, Chicago announced that it will enter the new-issue market on Tuesday with its nearly $1 billion new-money and refunding O’Hare International Airport-related revenue deal that has been on held due to interest rate conditions since mid-November.

Elsewhere in the new-issue market yesterday, Lehman Brothers priced $246.8 million of general obligation bonds for the University of California Regents in three series. Bonds in the largest series, $205.9 million, mature from 2011 through 2028, with term bonds in 2033, 2036, 2038, and 2040. Yields range from 2.85% with a 3% coupon in 2011 to 4.33% with a 5% coupon in 2040. Bonds in the next largest series, $36.9 million, mature from 2009 through 2023. Yields range from 2.70% with a 4% coupon in 2009 to 4.10% with a 4% coupon in 2023. All bonds are callable at a premium in 2016. Moody’s Investors Service assigns a rating of Aa1 and Standard & Poor’s rates the bonds AA. The deal also contains a $4 million taxable component.

First Southwest Co. priced $143.1 million of unlimited-tax schoolhouse and refunding bonds for the Spring Independent School District in Texas. The bonds mature from 2010 through 2028, with term bonds in 2033. Yields range from 2.89% with a 3.625% coupon in 2010 to 4.28% with a 5% coupon in 2033. The bonds are callable at par in 2017. The bonds are insured by the Permanent School Fund guarantee program, and the underlying credit is rated A1 by Moody’s and A by Standard & Poor’s.

Bear, Stearns & Co. priced $71.9 million of senior airport revenue refunding bonds for the Minneapolis-St. Paul Metropolitan Airports Commission, subject to the alternative minimum tax. The bonds mature from 2009 through 2016, with yields ranging from 3.30% with a 5% coupon in 2009 to 4.08% with a 5% coupon in 2016. The bonds, which are not callable, are rated AA-minus by both Standard & Poor’s and Fitch.

UBS Securities LLC priced $53 million of GO electric bonds for Norwood, Mass. The bonds mature from 2009 through 2023, with yields ranging from 2.74% with a 3.5% coupon in 2010 to 3.25% with a 4% coupon in 2016. Bonds maturing in 2009, 2013, and from 2017 through 2023 were not formally re-offered.

Bear Stearns priced $35 million of mortgage purchase bonds for the Maine State Housing Authority in two series. Bonds from the smaller series, $6.1 million, mature from 2013 through 2016, with yields ranging from 3.35% in 2013 to 3.65% in 2016, all priced at par. The bonds are not callable. Bonds from the larger series, $28.9 million subject to the alternative minimum tax, mature in 2022, 2027, and 2032, yielding 4.85%, 5.05%, and 5.20%, respectively, all priced at par. The bonds are callable at par in 2017. The credit is rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.

Banc of America Securities LLC priced $32.2 million of sewer system revenue bonds for South Carolina’s Greenwood Metropolitan District. The bonds mature from 2012 through 2026, with term bonds in 2030 and 2033. Yields range from 3.15% with a 3.5% coupon in 2012 to 4.48% with a 4.25% coupon in 2033. The bonds, which are insured by Financial Security Assurance Inc., are callable at par in 2018. The underlying credit is rated A2 by Moody’s and A-plus by Standard & Poor’s.

The Florida Department of Management Services competitively sold $25.5 million of certificates of participation to UBS Securities LLC, with a TIC of 4.10%. The bonds mature from 2008 through 2019, from 2021 through 2025, and in 2027. Yields range from 2.80% with a 3.25% coupon in 2008 to 4.39% with a 4.25% coupon in 2027. The bonds, which are insured by Assured Guaranty Corp., are callable at 101 in 2017, declining to par in 2018. The underlying credit is rated Aa2 by Moody’s, AA-plus by Standard & Poor’s, and AA by Fitch.

RBC Capital Markets priced $18 million of multifamily housing revenue bonds for the Louisiana Local Government Environmental Facilities and Community Development Authority in two series. Bonds from both series — $8.95 million and $9 million — mature in 2012, 2017, and 2028, yielding 3.65%, 4.10%, and 4.25%, respectively. All bonds were priced at par, and are not callable. The credit is backed by Fannie Mae.

Kearny, N.J., competitively sold $16.2 million of general improvement bonds to Citi, with a TIC of 3.87%. The bonds mature from 2009 through 2027, with yields ranging from 2.75% with a 3.5% coupon in 2009 to 3.40% with a 3.5% coupon in 2017. Bonds maturing from 2018 through 2027 were not formally re-offered. The bonds, which are callable at par in 2018, are insured by FSA. The underlying credit is rated A1 by Moody’s.

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