New Jersey dominated the market yesterday with $1.8 billion of refunding bonds, priced at a top interest rate of 6.15%, while secondary prices were mixed.

The New Jersey issue is the second largest long-term issue ever sold and the largest refunding issue, according to Securities Data Co.

The largest deal ever sold was $2 billion New Jersey Turnpike Authority bonds, marketed on Nov. 14, 1985.

Until now, the largest refunding was $1.62 billion of New Jersey Turnpike Authority refunding revenue bonds sold Nov. 22, 1991.

A 27-member syndicate led by Lazard Freres & Co. as senior manager priced, repriced, and boosted the size of the New Jersey issue.

At the repricing, the amount was raised to $1.8 billion from $1.6 billion. Yields were lowered by two basis points in 2006 and 2008 and by three basis points in 2011. Zero coupon bond yields were lowered by one basis point in 2007, by three basis points in 2008, and by five basis points in 2009.

Robert E. Poll Jr., partner and manager of the firm's municipal bond department, estimated the issue was oversubscribed top to bottom at least two or three times.

"We saw a broad response with institutions in the longer end and middle maturities and more retail support on the front end," he said. "It's the last substantial issue of the year, and that's part of the reason we got the response we did. People really did save up for this one, it was highly visible and that allowed us to accomplish this at this late date."

Away from the primary sector, secondary traders said the market would not be weighted down significantly by the issue.

"There is and will be a lot of investor demand and once everybody realizes it has come and gone, they will breath a sigh of relief," a trader said. "It's the last big issue for a while, and the market should be able to do better once it works this deal off."

New Jersey officials said late yesterday that the deal went "as well as any GO sale in recent years."

Robert Lurie, director of public finance for the state, said in terms of present-value savings, "the deal will save New Jersey residents over $30 million."

"We received broad support from retail and institutional investors," Lurie said. "Because of that support, we were able to achieve the lowest rates for a New Jersey GO sale since 1976."

He said the decision to include a detachable call option on the 2013 maturity was made "at the last minute, when it became clear there was broad-based interest at that level."

Lurie added that orders for the call options came from an array of "sophisticated investors interested in hedging interest rate risk."

He cited mutual funds, insurance companies, and, "large and diversified" Wall Street investment firms interested in the call option portion of the refunding.

"There's little to complain about with this deal."

The final reoffering scale included serial bonds priced to yield from 4.30% in 1996 to 6.15% in 2013. Serials from 1996 through 2007 and 2011 are non-callable.

The bulk of the loan was distributed in five different maturities:

The 2001 serial contained $119 million of the loan and was priced as 5 1/4s to yield 5.40%; the 2005 serial contained $112 million and was priced as 5 5/8s to yield 5.80%; and the 2006 maturity contained $113 million of the loan and was priced as 5 3/4s to yield 5.88%. The 2008 serial contained $109 million and was priced as 5.90s to yield 6.03% and the 2010 serial contained $124 million and was priced as 6s to yield 6.125%.

About $68 million of the loan was priced with a detachable call option in 2013. Buyers paid 10 basis points to own the call option.

Finally, non-callable capital appreciation bonds were priced to yield from 5.85% in 2002 to 6.30% in 2009.

The issue is rated Aa 1 by Moody's Investors Service, AA-plus by Standard & Poor's Corp., and AA-plus by Fitch Investors Service.

In other action, Merrill Lynch & Co. priced and repriced $147 million of New York State Dormitory Authority revenue bonds for the state university educational facilities.

At the repricing, yields were lowered by five basis points from 2006 to 2008.

Serial bonds were priced to yield from 4% in 1994 to 6.50% in 2009. A 2014 term was priced as 6 3/8s to yield 6.549%: a 2017 term was priced as 6 1/4s to yield 6.602%; and a 2022 term was priced as 6s to yield 6.60%.

The issue is rated Baa 1 by Moody's and BBB-plus by Standard & Poor's.

Goldman, Sachs & Co. priced $107 million Indiana Municipal Power Agency Power Supply System refunding revenue bonds.

The offering included serials bonds priced to yield from 3.25% in 1994 to 6.15% in 2007. A 2013 term was priced as 6 1/8s to yield 6.23%, a 2019 term was priced as 6 1/8s to yield 6.35%, and a 2023 were quoted at 5 1/2s to yield 6.30%.

The bonds are insured by Municipal Bond Investors Assurance Corp. and are triple-A rated by Moody's and Standard & Poor's.

Stifel, Nicolaus & Co. priced $87 million McGee Creek, Okla., Authority water revenue bonds.

The offering included serial bonds priced to yield from 2.75% in 1993 to 6.15% in 2008. A 2012 term was priced as 6s to yield 6.25% and a 2022 term was priced as 6s to yield 6.30%.

The bonds are insured by the Municipal Bond Investors Assurance Corp. and are rated triple-A by Moody's and Standard & Poor's.

Secondary Markets

Traders said secondary activity was again minimal and prices were narrowly mixed. The market took economic data in stride, content to focus on new issues or sit on the sidelines ahead of the holidays.

In the debt futures market, the March municipal contract settled up 6/32, to 96.15.

Players did report some institutional selling, while The Blue List of dealer inventory rose $101 million to $1.86 billion.

In secondary dollar bond trading, prices were mixed on the day.

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