Municipals round out week with another rally; New Jersey prices $2.6 billion of delayed TRANs

By Sheri Kasprzak

New York, Nov. 16 - Municipal yields were strong yet again on Friday, despite the drop in new issue activity, market sources said.

"We're still chugging along," said one trader reached in the afternoon. "Yields are firmer by 3 to 5 basis points, especially 10 years and out."

The new issue calendar during the week provided $10.5 billion of new offerings, the largest in months, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"With beltway media messages indicating a growing likelihood of tax increases for top income taxpayers, it's understandable that strong demand for tax-frees continues," said Schankel Friday.

"Next week's calendar is light, at about $3 billion, reflecting the Thanksgiving holiday."

Meanwhile, the State of New Jersey finally came to market with $2.6 billion of short-term notes after delaying the sale due to Hurricane Sandy.

"New Jersey completed their sale of $2.6 billion notes, with the yield for the seven-month securities coming in at 0.35%," said Schankel.

"The notes carried ratings of MIG2, SP-1 and F1, each a notch below the top short-term ratings the similar issue garnered last year."

Notes due in seven months

The New Jersey notes (MIG2/SP-1/F1) were sold competitively and are due June 27, 2013. The notes have a 2.5% coupon priced at 101.293.

Proceeds will be used to finance revenues and expenditures for the state's general fund ahead of the collection of taxes and revenues during the 2013 fiscal year.

Louisville sewer notes price

Elsewhere during the day, the Louisville and Jefferson County Metropolitan Sewer District of Kentucky brought $226.34 million of series 2012A sewer and drainage system subordinate bond anticipation notes, according to a pricing sheet.

The notes (MIG1/SP-1+/F1+) were sold competitively with Wells Fargo Securities LLC as the winning bidder.

The notes are due Dec. 4, 2013 and have a 2% coupon priced at 101.393.

Proceeds will be used to retire the district's series 2011B bond anticipation notes.

"We were extremely pleased that the three major rating agencies reaffirmed MSD's solid AA credit rating, which enabled us to receive such a favorable rate with this BAN," said Chad Collier, the district's chief financial officer.

"We had five major underwriters competitively bidding on this issuance. This is a reflection of the fact that MSD has developed a strong financial reputation within the investment community. This will benefit our ratepayers through the reduction of our financing costs for our capital improvement projects. This is the first in a series of transactions with our new financial adviser, Hilliard Lyons, that will improve financial strength of MSD for years to come."

New York Transitional prices

In other news, the New York City Transitional Finance Authority sold $882,805,000 of series 2013 future tax secured subordinate bonds, according to a pricing sheet.

The offering included $100 million of series 2013C-1 tax-exempt subordinate bonds, $100 million of series 2013C-2 taxable subordinate bonds, $130 million of series 2013C-3 taxable subordinate bonds, $310.9 million of series 2013D tax-exempt subordinate bonds and $241,905,000 of series 2013E tax-exempt subordinate bonds.

The 2013C-1 bonds are due 2014 to 2027 with 4% to 5% coupons.

The 2013C-2 bonds are due Nov. 1, 2035 and have a 3.75% coupon priced at 102.324.

The 2013C-3 bonds are due 2016 to 2024 with coupons from 0.68% to 2.6%, all priced at par.

The 2013D bonds are due 2014 to 2032 with coupons from 2% to 5%.

The 2013E bonds are due 2013 to 2027 with 2% to 5% coupons.

The bonds were sold competitively.

Proceeds will be used to finance the construction and equipment of schools and refund some of the authority's existing debt.

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