North Carolina brings $258.365 million in Garvees; municipals firm in heavy primary action

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, July 21 - The heaviest day for primary market activity was also a good day for the market, with yields down by a couple of basis points on the long end, trader said.

"From what I've seen, we might be better by a basis point or two, especially longer," said one trader. "Mostly flat on the short end."

Another market source said he felt the summer mildly took its toll on the municipal market overall, but the major news was from out of California, said Tom Kozlik, vice president and municipal analyst for Janney Montgomery Scott LLC.

The news of a budget deal between governor Arnold Schwarzenegger and the legislature left the state with only a slightly clearer path to recovery. The Golden State announced Tuesday that it had decided to cut across the state government in order to bridge its $26 billion budget gap.

"There's a little bit of wait and see going on especially with Cal," Kozlik said, but "it's good news that came out this morning."

California still has to reconcile its declining revenues as well as actually approving the budget deal, he said.

"That's why it's a little wait and see," he said. "It's going to help them go forward with next problems."

The state is loosely planning a short-term issue, he said.

No other details were available about the deal, but even California is playing wait and see, he said.

The treasurer's office may wait to see how the rating agencies react to the budget deal.

Elsewhere, Maryland's announcement of its $485 million deal came as welcome news to investors in the capital region.

However, one trader commented that "Maryland is famous for coming at market highs."

Still, municipal bonds "are in the range of the all-time low levels," Kozlik said, so Maryland might have missed the very bottom, but to call it a high "may be missing the big picture."

North Carolina's Garvees

Looking to Tuesday's primary market action, the North Carolina Department of State Treasurer sold $258.365 million in series 2009 grant anticipation revenue vehicle bonds (Aa3/AA-/AA), said a market source who saw the bonds.

The bonds were sold through lead manager Merrill Lynch & Co. Inc.

The bonds are due 2011 to 2021 with coupons from 2% to 5% and yields from 1.08% to 3.93%.

Proceeds will be used to fund Garvee projects throughout the state, including improvements to the state's major highways - Interstate 40 and Interstate 85, said Heather Franco, spokeswoman for the state treasurer's office. The bonds will also accelerate the construction of 49 Department of Transportation projects, Franco noted.

Florida DOT sale

Elsewhere Tuesday, the Florida Department of Transportation priced $200 million in series 2009A right-of-way acquisition and bridge construction bonds, said a sellside source connected to the deal.

The bonds (Aa1/AAA/AA+) were sold competitively with Morgan Stanley & Co. Inc. winning the bid. The true interest cost came in at 4.73%.

The bonds are due 2010 to 2030 with term bonds due 2034 and 2039.

Proceeds will be used to acquire real property and rights-of-way to construct bridges throughout the state.

Santa Fe school deal

In other primary market news, the Santa Fe Public School District in New Mexico sold $80 million in series 2009 general obligation bonds, said a sellside source.

The bonds were sold competitively with Piper Jaffray & Co. coming in with the winning bid. The TIC was 2.58%.

RBC Capital Markets Inc. was the financial adviser.

The bonds are due 2010 to 2019.

Proceeds will be used to construct, renovate, equip, remodel and furnish school buildings.

Maryland bonds

Looking back at the Maryland sale, the state will offer $485 million in state and local facilities loan of 2009 G.O. bonds (Aaa/AAA/AAA), according to a spokeswoman for the treasurer.

Series A will be worth $235 million and carry maturities from 2012 to 2023. Series B will be worth $200 million and carry maturities from 2012 to 2023. Series C will be one $50 million Build America Bond due 2024.

The bonds are scheduled to price July 31.

Citigroup Global Markets Inc. will act as lead underwriter.

Proceeds will be used for the acquisition and construction of state facilities as well as grants to local agencies.

Secondary firmer

Moving to the secondary market, a trader reached Tuesday said the long end of the yield curve was looking better by a couple of basis points but noted that the rest of the market was little changed.

In terms of volume, things were a little improved over Monday's relatively quiet session.

"We're seeing some interest," the trader said.

Among that action were the Sacramento County Airport System's recently priced series 2009B bonds. The 5.125% 2025 bonds were seen at 5.117% Tuesday.

Also trading Tuesday were the Louisiana Public Facilities Authority's revenue bonds for the Franciscan Missionaries of Our Lady of Lourdes. The 4.5% 2015s were seen at 4.427%.

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