California GOs Bear 6.066% TIC; Prices End Mixed In Light Trading

An issue of $524 million California of general obligation bonds were priced with a maximum yield of 6.35% in 2011 yesterday, while secondary prices ended narrowly mixed as the market continues to chop through supply.

Bank of America won the California full faith and credit various purpose general obligation bonds with a true interest cost of 6.066%.

A Bank of America officer said the deal was done presale except for bonds in the 2005, 2008, and 2009 maturities that totaled approximately $83 million. Retail was the primary buyer, the officer said, although there was some institutional participation.

An unsold balance of $45 million was reported late in the session.

Market sources, however, speculated that there would be plenty of Street float.

The bonds were reoffered to investors at aggressive yields ranging from 4.30% in 1992 to 6.35% in 2011.

The issue carries gilt-edged triple-A ratings from Moody's Investors Service, Standard & Poor's Corp., and Fitch Investors Service.

Reflecting the market's price improvement this week, traders, who participate in the makeup of The Bond Buyer's indexes, said last week that they expected a 6.50% yield on the long end of the California scale.

Late Tuesday, several market sources said that a block of $4 million California 6.40s of 2008 traded just below the coupon. Early yesterday bonds were offered at a 6.35%, traders said.

California last came to market Aug. 14. Bank of America priced $1.2 billion GOs with an aggressive maximum yield of 6.60% in 2011.

In negotiated new issue activity, Donaldson, Lufkin & Jenrette Securities Corp. as senior manager tentatively priced and repriced $266 million of Connecticut special tax obligation bonds for transportation infrastructure purposes to lower term bond yields by as much as four basis points.

A Donaldson officer said that the deal saw broad demand from investors.

"This was as good demand as I've seen," the officer said. "A substantial portion of the transaction is on the way, even with the repricing."

The final pricing included serials priced to yield from 5% in 1993 to 6.53% in 2007.

Term bonds in 2009 were priced to yield 6.65%, while terms in 2010, 2011, and 2012 were priced to yield 6.58%.

The bonds are rated A1 by Moody's and AA-minus by Standard & Poor's and Fitch Investors Service.

Benson R. Cohn, Connecticut's assistant treasurer for debt management, said the deal brought "the lowest rate in history by 22 basis points."

The state managed an all-time low TIC of 6.553%, he said, "even though we extended the average life [of the bonds] way beyond what it normally is." The average maturity on yesterday's deal was 14.87 years, compared with 11 years on past deals.

Connecticut last priced special tax bonds for transportation on May 22 with a $200 million offering priced by Bear, Stearns & Co. The issue hit the primary with a maximum yield of 6.9269% for term bonds in 2011.

In other action, Dillon, Read & Co. tentatively priced and repriced $140 million of New York State Medical Care Facilities Finance Agency secured hospital revenue bonds to lower yields five to 10 basis points on the serial bonds.

Serial yields were scaled from 6.10% at par in 1995 to 7.15% at par in 2003.

A 2011 term is priced at par to yield 7.35%, while a maximum term bond, containing $84 million of the loan, is priced as 7.40s at par.

The bonds are rated Baa1 by Moody's and BBB-plus by Standard & Poor's.

Secondary prices ended the session narrowly mixed in moderate trading as the market focuses on the primary sector.

In the debt futures market, the December municipal futures contract settled down 1/32 to 94.00 in sympathy with declines in the Treasury sector. The December MOB spread narrowed to negative 158.

Secondary trading has been brisk over the last week, but yields have generally held in, despite increasing supply.

The Bond Buyer's 30-day visible supply yesterday fell below $3 billion for only the second time in the past nine business days, to $2.82 billion, down $521 million from the previous session.

Standard & Poor's Blue List of dealer inventory continues to rise, adding another $23 million from Tuesday, and totaled $1.43 billion yesterday. Since last Wednesday, the Blue List has increased by $196 million.

In secondary dollar bond trading, Triborough Bridge and Tunnel Authority 6 5/8S of 2017 were quoted at 98 5/8-7/8 to yield 6.71%. New Jersey Turnpike Authority 6.90s of 2014 were quoted at 99 3/4-7/8 to yield 6.90%. New York LGAC 7s of 2021 were quoted at 99-1/8 to yield 7.07%, while New York LGAC 7s of 2016 were quoted at 98 1/8-3/8 to yield 7.05%. East Bay California 6s of 2016 were quoted at 97 5/8-7/8 to yield 6.16%.

In short-term note activity, yields were narrowly mixed on the day.

In late secondary trading, Pennsylvania 5 1/4% Tans were quoted at 4.53% bid, 4.48% offered, while Texas 5% Trans were quoted at 4.40% bid, 4.38% offered. March New York State Trans were quoted at 5.10% bid, 5.07% offered and Los Angeles notes were quoted at 4.47% bid, 4.42% offered.

Negotiated Pricings

Scott & Stringfellow Investment Corp. tentatively priced $32 million of Industrial Development Authority of Hanover County, Va., medical facilities revenue bonds for the Richmond Memorial Hospital and Hanover Medical Park Project.

The offering included serial bonds priced to yield from 4.70% in 1992 to 6.30% in 2003.

Term bonds in 2011 and 2021 were not formally reoffered to investors.

The bonds, which are MBIA-insured, have triple-A ratings from both Moody's and Standard & Poor's.

Manufacturers Hanover Securities Corp. priced $30 million of Michigan Higher Education student loan authority student loan revenue bonds.

The offering, subject to the federal alternative minimum tax, is priced to yield from 6% in 1997 to 6.90% in 2007.

The issue is AMBAC-insured and has triple-A ratings from both Moody's and Standard & Poor's.

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