SAN FRANCISCO — Washington will competitively sell $1.2 billion of general obligation bonds Wednesday into a market ready for a big deal during a down month.
“The market has been starved for paper. It is a technically strong part of the calendar year,” said Michael Pietronico, chief executive officer at Miller Tabak Asset Management.
“Perhaps [Washington’s deal] may have to come a little bit cheaper because of its sheer size, but there should be plenty of demand for it because it is a very good trading name and certainly well-respected credit.”
The state will sell four series of bonds in four auctions: $551 million of various-purpose GO refunding bonds, $125 million of motor-vehicle tax refunding GOs, $230 million of various-purpose GOs and $323 million of motor-vehicle tax GOs.
On Friday, the Municipal Market Data benchmark yield index ended with its 10-year bond at 1.67% and 30-year debt at 2.72%.
A block of $4 million of Washington State various-purpose GO bonds maturing in 2017 sold Tuesday in the secondary market at a price of 121 of par and a yield of 0.65%.
In August, Citi beat out seven other firms during the state’s sale of $338.7 million of various-purpose general obligation refunding bonds at a true interest cost of 2.59%. Bank of America Merrill Lynch bid the lowest out of a group of eight to grab Washington’s $364.5 million of motor vehicle fuel-tax refunding bonds with a true interest cost of 2.52%.
The money raised by this week’s bond sale will be used for various state construction and transportation projects. The new-money side of the deal will have maturities from one year out to 30 years.
Washington is rated double-A-plus across the board. Moody’s Investors Service and Fitch Ratings revised their outlook on the state in January 2012 to negative due to weaker revenues. Standard & Poor’s has maintained its stable outlook. All ratings were affirmed this month.
Moody’s said in a report last week that the state’s negative outlook reflects the size of the revenue falloff caused by the recession, continuing budget gaps, modest reserves and high fixed costs for Washington’s above-average debt position.
Moody said its rating also reflects the state’s sound management tools, a willingness to address budget shortfalls and strong demographic trends.
“Washington’s economy is on the mend, and its revenues are poised to grow — albeit more slowly than during prior economic expansions,” S&P said in its report last week.
After this offering, the state will have $18.2 billion of GO bonds outstanding, of which $7.2 billion is payable first from its motor-vehicle fuel tax or toll revenue from the Tacoma Narrows Bridge, according to S&P.
Washington’s financial advisors on the sales are Montague DeRose and Associates LLC and Seattle-Northwest Securities Corp. Bond counsel is Foster Pepper PLLC.
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Corrected January 23, 2013 at 9:32AM: Editor's Note: This article was updated to show the negative outlooks were assigned in January 2012, not 2013.