Munis Unchanged as Buyers Look to Big Deals

The municipal market was unchanged with a slightly weaker tone yesterday as investors focused on the primary, which saw Texas sell $5.5 billion of tax and revenue anticipation notes and Pennsylvania sell $689.6 million of general obligation bonds by competitive bid.The Texas Trans were sold to various bidders, with Citi and Morgan Stanley each winning more than a total of $1 billion of the deal. Citi won a $500 million portion with a net interest cost of 0.46%, while Morgan won a $500 million component with an NIC of 0.48%. The issuer set the coupon at 2.5% on Monday. The notes carry the highest short-term ratings from all three major rating agencies - MIG-1 from Moody's Investors Service, SP-1-plus from Standard & Poor's, and F1-plus from Fitch Ratings.

Pennsylvania sold sold its refunding GOs to Merrill Lynch & Co. at a true interest cost of 3.09%. The bonds mature from 2010 through 2021, with yields ranging from 0.60% with a 3% coupon in 2010 to 3.21% with a 5% coupon in 2019.

Bonds maturing in 2013, 2020, and 2021 were not formally re-offered. The bonds, which are not callable, are rated Aa2 by Moody's and AA by both Standard & Poor's and Fitch.

Among 5% coupon paper in the deal, bonds maturing in 2019 were widest to that Monday's Municipal Market Data triple-A yield curve, with yields 25 basis points over the curve. Bonds maturing in 2013 were tightest to the scale, with yields 18 basis points over.

Pennsylvania last came to the market with a competitive GO deal in May. JPMorgan won that $619.7 million deal with a TIC of 3.67%. The bonds mature from 2010 through 2029, with yields ranging from 1.32% with a 5% coupon in 2012 to 4.11% with a 4% coupon in 2029. Bonds maturing in 2010 and 2011 were not formally re-offered. The bonds are callable at par in 2019.

Among 5% coupon paper in the deal, bonds maturing in 2021 were widest to that day's MMD triple-A yield curve, with yields 25 basis points over the curve. Bonds maturing in 2022 were tightest to the scale, with yields seven basis points over.

Additionally, 5% coupon paper in yesterday's GO deal yielded between nine and 30 basis points higher than comparable maturities with 5% coupons in the May sale.

Traders said tax-exempt yields in the secondary market were mostly flat.

"We had some pretty decent demand for the new issues," a trader in New York said. "The secondary was pretty quiet, but people were involved in the primary, pretty decent demand. Overall, though, the market was pretty unchanged, maybe a touch weaker in spots."

"Not a ton of activity today, but there was some business getting done," a trader in Los Angeles said. "It feels a little bit weaker, but we're probably unchanged on the whole."

The Treasury market was mixed yesterday. The yield on the benchmark 10-year note, which opened at 3.47%, was quoted near the end of the session at 3.44%.

The yield on the two-year note was quoted near the end of the session at 1.02% after opening at 1.01%. The yield on the 30-year bond, which opened at 4.26%, was quoted near the end of the session at 4.22%.

As of Monday's close, the triple-A muni scale in 10 years was at 83.5% of comparable Treasuries, according to MMD. Thirty-year munis were 105.1% of comparable Treasuries.

As of Monday's close, 30-year tax-exempt triple-A GOs were at 108.4% of the comparable London Interbank Offered Rate.

Elsewhere in the new-issue market yesterday, Raymond James & Co. priced for retail investors $181.8 million of capital asset acquisition special obligation bonds for Miami-Dade County. The deal consists of $136.6 million of Series A tax-exempt debt and $45.2 million of Series B taxable Build America Bonds.

The BABs mature in 2022, 2029, 2034, and 2039, yielding 6.17%, or 4.01% after the 35% federal subsidy, 6.95% or 4.52% after the subsidy, 7.10% or 4.62% after the subsidy, and 7.20% or 4.68% after the subsidy, respectively.

All were priced at par. The bond were priced to yield between 245 and 270 basis points over the comparable Treasury yields.

The Series A tax-exempt debt matures from 2010 through 2029, with term bonds in 2034 and 2039. Yields range from 0.85% with a 3% coupon in 2010 to 5.25% with a 5.125% coupon in 2039.

All the bonds in both series are callable at par in 2019, and are insured by Assured Guaranty Corp. The underlying credit is rated A1 by Moody's and A-plus by Standard & Poor's.

JPMorgan priced for retail investors $170.1 million of tax-exempt and taxable bonds for the Indianapolis Local Public Improvement Bond Bank. The $149.5 million tax-exempt series matures from 2015 through 2020, with yields ranging from 2.58% with a 3% coupon in 2015 to 3.64% with a 5% coupon in 2020. The bonds are callable at par in 2019.

Bonds from the $20.5 million taxable series mature from 2011 through 2015 and are not callable. The bonds are priced to yield between 85 and 135 basis points over the comparable Treasury yields.

The credit is rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.

In economic data released yesterday, the consumer confidence index rebounded to 54.1 in August from an upwardly revised 47.4 last month. Economists polled by Thomson Reuters predicted the index would rise to 47.5.

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