Municipal yields close flat to slightly off; San Antonio brings $655.37 million issue of bonds

By Sheri Kasprzak

New York, May 23 - Yields were largely unmoved on Wednesday as a huge slate of new offerings came to market, said traders.

"There's not a lot of movement, but the market feels a bit cheaper," one trader said.

"I'd say maybe a basis point off in places, but for the most part, we're unmoved. So much is pricing, secondary is relatively quiet ahead of the long weekend. I think the weekend is a factor in the cheaper tone. We have this enormous supply and investors are kind of ambivalent."

Massachusetts bonds seen at 25 bps, 76 bps spreads

Meanwhile, the Commonwealth of Massachusetts' $350 million sale of series 2012B consolidated loan general obligation bonds from Tuesday were seen at spreads of 25 basis points and 76 bps to the AAA MMD scale, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

The bonds (//AA+) were sold competitively with Bank of America Merrill Lynch winning the bid.

The bonds are due 2023 to 2028 with a term bond due in 2042. The serial coupons range from 3% to 5%. The 2042 bonds have a 4% coupon and priced at 102.655.

The structure included maturities from 2024 to 2043 with yields of 2.3% to 3.85%, Kozlik said.

"Those levels were a 25 basis point and 76 basis point spread to the AAA Municipal Market Data scale," said Kozlik.

"An optional redemption feature was also included on June 1, 2020 in the Massachusetts G.O. issue."

Proceeds will be used to finance or reimburse the state for capital expenditures under the current capital financing program.

Massachusetts sets example

On a broader level, Kozlik said that the commonwealth is setting a positive example credit-wise.

"Disclosure and communicating with the investor community has been a priority ever since Massachusetts treasurer Steve Grossman took office in January 2011," Kozlik said.

"In fact, just after the treasurer entered into office, Grossman held an analyst meeting we attended which included comments on the high priority the treasurer's office placed on effectively and efficiently sharing information."

San Antonio debt prices

Leading Wednesday's busy calendar, the City of San Antonio sold $655.37 million of series 2012 electric and gas systems revenue refunding bonds, said a pricing sheet.

The bonds (Aa1/AA/AA+) were sold through lead managers Bank of America Merrill Lynch and Barclays Capital Inc.

The bonds are due 2021 to 2025 with 3% to 5.25% coupons.

Proceeds will be used to refund the city's series 2005, 2005A and 2006A electric and gas system revenue refunding bonds.

Reading, Mass., sells bonds

Elsewhere, the Town of North Reading, Mass., priced $51,411,000 of series 2012 municipal purpose loan general obligation bonds, said a pricing sheet.

The bonds (Aa2) were sold competitively with Fidelity Capital Markets Inc. winning the bid at a 3.538% average interest rate, said Elizabeth Pavao, the town's financial director.

The bonds are due 2013 to 2030 with term bonds due in 2035 and 2037. The serial coupons range from 2% to 5%. The 2035 bonds have a 5% coupon and priced at 114.265. The 2037 bonds have a 4% coupon and priced at par.

Proceeds will be used to finance capital improvements for the town and the construction of a high school and middle school for the town.

"The town received two bids on the bonds," Pavao said.

"Approximately $1.1 million of bond proceeds will be used to finance various capital improvement projects, and the remaining $50 million will finance the town's high school and middle school construction project."

Before the sale, Pavao said, Moody's affirmed the town's Aa2 rating.

"The rating agency cited the town's sizeable tax base, above-average socioeconomic wealth levels and history of successful overrides of Proposition 2½ as positive credit factors."

The proposition places limits on cities and towns with regard to the amount of revenue they can raise from local property taxes each year to finance municipal operations.

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