"Find it, buy it" is the motto Paul Sack, vice president of investments at Union Bank of California in Portland, Ore., is employing these days when searching for the "almighty 5%" yields on long-term tax-exempts for his retail customers.
Utah's supply picture, meanwhile, has afforded individual investors more of an opportunity to find paper and take the opposite approach - shorten their maturities to less than 10 years while staying conservative.
With few sizable Oregon deals on the primary calendar to cure the state's severe supply crunch, Sack said it's been difficult to cater to individual investors who are either coming off the sidelines on rumors that rates are headed lower or retreating to bonds from equities, and want to extend their maturities to get the maximum yields in today's market.
"We had a lot of calls June 1, (so) we have money to invest ... that's not been the problem," Sack explained. "Oregon paper is pretty sparse."
His retail demand far exceeds the supply of insured and high-quality, 25-year paper that carries the target yields his customers are seeking.
Two recent new issues provided him with a handful of bonds he could resell - Medford, Ore., Hospital Facilities Authority hospital revenue bonds for Asante Health System with a 5% coupon due in 2018 yielding 5.10%, and insured Oregon certificates of participation due in 2016 with a 4.75% coupon yielding 5%.
Going forward, though, the visible supply remains bleak.
And the secondary market of Oregon paper is tight as well. For instance, Standard & Poor's Blue List includes only nine Oregon municipal bond offerings, many of which are premium bonds, which mom-and-pop investors typically avoid because of the high dollar price.
A $30 million general obligation offering from Newberg, Ore., School District #29JT, meanwhile, remains listed on the day-to-day calendar.
In Utah, Chip Loughridge, a municipal trader and underwriter at Zions First National Bank in Salt Lake City, says retail investors are seeking out local paper in a flight to quality in the short-term sector.
"We haven't seen a lot of long bond buying," Loughridge said. "Retail is mostly staying safe, staying liquid, and staying 10 years or shorter."
He cited a recent $35.7 million Utah Water Finance Agency sewer revenue refunding on behalf of the Timpanogos Special Service District as an example.
The 2003 maturity carried a 4.30% coupon and was priced at par, while the 2009 bonds with a 4.70% coupon were priced at a slight discount to yield 4.72%, according to Loughridge. The bonds are insured by MBIA Insurance Corp.
Zions Investment Securities Inc., the bank's securities arm, was a co- manager on the deal last week with George K. Baum & Co.
In addition to shortening their maturities, Loughridge said, many of the bank's retail investors are continuing to buy tax-free bonds as a means of creating laddered portfolios to diversify their total assets, especially if they were heavily overweighted in stocks.
On the horizon, next week, Prudential Securities Inc. is slated to price a $26.2 million Utah Board of Regents hospital revenue issue.
Competitively, a $265 million Utah GO offering is scheduled for June 16, while a $116 million Utah State Building Authority lease revenue deal is listed on the day-to-day calendar.
