An issue of $413 million New Jersey bonds led a herd of more than $1 billion in new deals yesterday. Prices in the secondary finished stable.
Lehman Brothers won the New Jersey issue with a true interest cost of 6.1097%.
A group led by Goldman, Sachs & Co. had the cover bid with a TIC of 6.126801%.
The maximum yield was a 6.45% in 2012, compared with the current Bond Buyer GO index reading of 6.80%.
The interest cost on the issue was the lowest in the last decade.
The previous lowest was a $198 million offering won on Oct. 10, 1986 by Chase Securities with a TIC of 6.187%. The maximum yield was 6.50% in 2005 on that deal, compared to The Bond Buyer GO index of 7.06%.
A Lehman Brothers officer said the deal saw demand from crossover over buyers -- those who usually buy taxable bonds -- and reported an unsold balance of $84 million near session's end.
Serial bonds were reoffered to investors at yields ranging from 4.20% in 1993 to 6.45% in 2012.
The bonds are rated Aaa by Moody's Investors Service and AA-plus by Standard & Poor's Corp., and AAA by Fitch Investors Service.
Lehman also priced $200 million New Jersey daily variable rate tax and revenue anticipation notes in the short-term sector.
Market sources said the securities were reoffered to investors as 2 1/2s at par due June 15, 1992.
Returning to the long-term primary, Smith Barney, Harris Upham & Co. priced and repriced $363 million Commonwealth of Massachusetts general obligation bonds in the negotiated sector.
Serial bond yields were lowered five to 10 basis points, while term bond yields in 2010 and 2012 were lowered by two basis points.
A Smith Barney officer said the deal saw a great deal of real retail business, especially on the serial bonds and the 7s at par in 2007. Institutions were buyers of the long maturities.
"The amount of real mom and pop business on this deal is a real compliment to the ability of the Commonwealth to demonstrate to taxpayers that they are turning the situation around," the officer added.
The pricing included serial maturities priced to yield from 4.90% in 1993 to 6.75% in 2003. A 2007 term was priced as 7s at par. The maximum term of 2010, containing $91 million of the loan, was priced at an original issue discount as 6 7/8s to yield 7.08%, and a 2012 term was priced as an original issue discount as 6s to yield 6.98%.
The bonds are rated Baa by Moody's, BBB by Standard & Poor's, and A by Fitch Investors Service.
Despite the commonwealth's lowest-in-the-nation ratings, market players say the bonds are attractive.
"It seems to me that if I was going to take a high-yield security," one national dollar bond trader said, Massachusetts "would probably be one I'd have to look at. I'd take some comfort from the fact that it is state general obligation, and it's got about as much yield as you're going to find."
"The commonwealth has been out-trading its rating" and some institutional buyers will flock to the offering in anticipation of increasingly positive fiscal news from Massachusetts, said one finance official, familiar with the deal.
"There clearly is credit play," the source said. "Most institutional investors like what [Gov.] Bill Weld is doing for the budget, and as a result they truly believe that the credit will be rated higher sometime soon." He predicted an upgrade for the Bay State by the middle of 1992.
In other action, $295 million Michigan State Building Authority revenue refunding bonds were priced by a Merrill Lynch & Co. group.
Merrill reported the account closed by late in the session.
The offering included serial bonds priced to yield from 3.90% in 1992 to 6.75% in 2007. A 2011 and a 2020 term were priced to yield 6.80%. There also are five special sinking fund tranches, priced to yield from 4.12% to 6.85%. The bonds mature in 2021 and have average lives ranging from 1.4 years to 11 years.
The bonds are rated A by Moody's, AA-minus by Standard & Poor's, and AA-minus by Fitch.
Goldman, Sachs raised some yields on $250 million Texas National Research Laboratory Commission Financing Corp. lease revenue bonds for the Superconducting Super Collider project.
Serial yields were raised five to 10 basis points in 1999 to 2005. Term bond yields in 2012 were raised by about three basis points, while the 2021 term maturity was raised by five basis points.
The final pricing included serials priced at par to yield from 5.50% in 1995 to 6.85% in 2005. A 2011 term was priced as 6.95s to yield 6.98% and a 2021 term, containing $157 million of the loan, was priced to yield 7.14%.
The bonds are rated A by Moody's, A-minus by Standard & Poor's, and A by Fitch.
Secondary Market
Traders said that prices were firm in the morning, and by session's end high-grade yields were as much as 15 basis points lower on the day. Longer bonds, however, were mostly unchanged.
In the debt futures market, the March municipal contract settled down 3/32 to 94.16.
Traders reported several small bid-wanted lists out on the broker wires and some larger pieces out for the bid, including $15 million prerefunded bonds.
In secondary dollar bond trading, Denver Airport 7 3/4s of 2021 were quoted at 94 3/8-95 1/2 to yield 8.15%, Port Authority of New YOrk and New Jersey 6 1/2s of 2021 were quoted at 95 3/4-96 to yield approximately 6.81%, and New Jersey Turnpike Authority 6 1/2s of 2016 were quoted at 98 1/4-1/2 to yield 6.68%.
In the note sector, yields were mostly unchanged to five basis points lower in spots.
Traders reported a relatively quiet session on thin volume, despite the pricing of $700 million Michigan notes Monday.
In late secondary trading, Los Angeles Trans were quoted at 3.55% bid, 3.50% offered, Pennsylvania notes were quoted at 3.65% bid, 3.55% offered, and June California notes were quoted at 3.60% bid, 3.50% offered. New York City Rans were quoted at 5.10% bid, 5% offered.
Negotiated Pricing
An issue of $300 million taxable Texas Public Finance Authority Workers' Compensation Insurance Fund maintenance surcharge tax revenue bonds were priced by a Paine Webber group.
The offering included bonds priced to yield from 75 basis points over comparable Treasuries in 1992 to 165 basis points over comparable Treasuries in 2006.
The bonds are rated A by Moody's and A-minus by Fitch.
Lehman Brothers priced $95 million California Pollution Control financing Authority solid waste revenue bonds for the North County Recycling Center.
Serial bond yields were scaled from 5.30% in 1995 to 6.60% in 2005. A 2011 term was priced to yield 6.891% and a 2017 term was priced to yield 6.931%.
The bonds are backed by a letter of credit from Union Bank of Switzerland and triple-A rated by both Moody's and Standard & Poor's.
Upcoming Issue
Today's sale of $450 million New York Local Government Assistance Corp. revenue bonds, to be priced by Lehman Brothers, is expected to see good investor demand, despite New York State's budget woes.
The bonds, backed by state appropriation, have a good reputation on the Street, and are expected to be priced wit a 7.20% to 7.25% yield on the long end.
Several market players acknowledged yesterday that the deal may see some price concessions due to the state's projected budget deficit. "People think of Little Macs as a better bond than other state appropriation bonds," said one trader. "It's more a matter of price than credit. People have to think about the state's bonds and that gets translated into yield."
The bonds are rated A by Moody's.
