The municipal market was unchanged to slightly weaker yesterday, as two deals worth about $1 billion total came to market after weeks of primary market inactivity.
Traders said tax-exempt yields were flat to higher by two basis points.
"We're maybe a little weaker if anything right now," a trader in New York said. "It's nice to see these new deals in the market, though. For now, though, a lot of people are still on the sidelines."
In the new-issue market yesterday, Goldman, Sachs & Co. priced $605 million of electric system revenue bonds for New York's Long Island Power Authority. The issue contains a split maturity in 2033. A $250 million piece, insured by Berkshire Hathaway Assurance Corp., yielded 5.75% with a 5.5% coupon. An uninsured piece, worth $280 million, yields 6.25% with a 6% coupon. The bonds are callable at par in 2019. The underlying credit is rated A3 by Moody's Investors Service and A-minus by Standard & Poor's and Fitch Ratings.
Morgan Stanley priced $375 million of revenue and revenue refunding bonds for the Kentucky State Property & Buildings Commission. The deal was upsized by more than $100 million after the retail pricing period.
"We held a one-day retail order period on Monday and generated more than $130 million of retail orders which anchored the transaction," said Stratford Shields, head of public finance at Morgan Stanley. "The deal received strong institutional demand from a broad base of investors on Tuesday and the transaction size was upsized to $375 million to satisfy the commonwealth of Kentucky's capital finance project needs."
The bonds mature from 2009 through 2020, with term bonds in 2023 and 2028. Yields range from 3.25% with a 3% coupon in 2010 to 5.80% with a 5.5% coupon in 2028. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's, A-plus by Standard & Poor's, and AA-plus by Fitch.
However, even as these deals came to market, a $750 million Massachusetts general obligation revenue anticipation note deal, which was postponed last Wednesday, was again put on the shelf due to market conditions.
Officials said the state has enough liquidity to hold off pricing the short-term debt until the market stabilizes. At the same time, the commonwealth's Treasury Department is evaluating whether to potentially tap into a new commercial paper funding facility created by the Federal Reserve to buy three-month commercial paper directly from issuers to add liquidity to the strained short-term market. The Fed announced the formation of the CPFF yesterday.
"We're not going to sell into a bad market when we don't have to," Massachusetts Treasurer Timothy Cahill said in an e-mail. "The state's cash position is solid. We will be patient and seek this additional liquidity when we have more confidence that we will get the best price for taxpayers."
Officials originally planned to price the notes on Oct. 2, then rescheduled the deal for yesterday. A new pricing date is yet to be determined, according to Treasury spokeswoman Francy Ronayne.
The credit is rated MIG-1 by Moody's, SP-1-plus by Standard & Poor's, and F1-plus by Fitch.
In other new-issue activity, Madison, Wis., competitively sold $58 million of GO promissory notes to Hutchinson, Shockey, Erley & Co. with a TIC of 3.82%. The bonds mature from 2009 through 2018, with yields ranging from 2.90% with a 3.5% coupon in 2011 to 4.30% priced at par in 2018. The bonds, which are callable at par in 2018, are rated Aaa by Moody's.
Topeka, Kan., also competitively sold two issues yesterday, the larger one $24.6 million of GO improvement and refunding bonds to Morgan Keegan & Co. with a TIC of 5.29%. The bonds mature from 2009 through 2030, with coupons ranging from 3.5% in 2009 to 5.6% in 2030. None of the bonds were formally re-offered.
Topeka also competitively sold $16.4 million of temporary notes to Morgan Stanley with a TIC of 4.44%. The notes mature in Nov. 2009, yielding 4.50% priced at par.
The long-term debt is callable at par in 2013 and rated Aa3 by Moody's. The short-term debt is rated MIG-1 by Moody's.
Hennepin County, Minn., postponed until further notice a competitive sale of $81.5 million of GOs, originally scheduled to come to market today.
The Treasury market showed mild losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.45%, was quoted near the end of the session at 3.48%. The yield on the two-year note opened at 1.43%, and was quoted near the end of the session at 1.44%. And the 30-year Treasury bond, which opened at 3.97% and was quoted near the end of the session at 4.01%.
Trades reported by the Municipal Securities Rulemaking Board showed some losses. Bonds from an interdealer trade of insured California 5.25s of 2030 yielded 5.69%, two basis points higher than where they were sold Monday. A dealer sold to a customer California's Bay Area Toll Authority 5s of 2039 at 5.48%, one basis point higher than where they traded Monday. Bonds from an interdealer trade of insured Chicago 5s of 2025 yielded 5.48%, even with where they traded Monday.
"We're still weaker on the whole," a trader in Los Angeles said. "There wasn't much activity, but we're down up to three basis points in spots, probably down one or two overall."
The economic calendar was light yesterday.
