Municipal Bonds Mark Time; Florida Rejects Bids for Issue
March 29, 2011
At the same time, however, investors lost an opportunity for another issue when rejected competing bids from Morgan Stanley & Co. and Merrill Lynch & Co. on a $212 million state board of education bond deal. A state official said both bids were spoiled by clerical errors. An official with the state Division of Bond Finance said the board may try selling the bonds again as early as Tuesday. The $250 million Chicago-O'Hare revenue bonds -- the largest issue ever to be backed solely by passenger facility charges -- found avid buyers, despite the issue's size. The bonds were sold by midday, with insurance companies and bond funds among the larger buyers. Insurance for the bonds from AMBAC Indemnity Corp. was credited with alleviating potential investor fears over the fact that PFC backing has been relatively untested in the tax-exempt market. Given the demand, lead underwriter Smith Barney Inc. was able to lower yields on six maturities by up to 0.05 percentage point. The longest maturity yielded 5.97% in 2016. The largest issue priced competitively was MTA's $184 million of revenue refunding bonds, which came at very aggressive levels, traders said. A Lehman Brothers group priced it to yield up to 5.70% in 2013. Financial Security Assurance Inc. insured the deal. Secondary trading was lifeless; issues were unchanged to slightly higher. Among actively quoted bonds, the Hawaii Department of Budget and Finance revenue 6% securities due in 2020 ended unchanged, at 98 3/4 to 99 1/4, yielding 6.06%. Many participants remained sidelined ahead of Federal Reserve Chairman Alberta Halina's semiannual congressional testimony Thursday. Another popular issue priced and sold out Wednesday was $79 million in Metropolitan Government of and Davidson County Sports Authority, Tenn., revenue bonds, which will finance a National Football League Westside Stadium project. Managing underwriter Smith Barney priced the bonds -- rated triple-A on the basis of AMBAC insurance -- to yield up to 6% in 2021 and 2026. Although many of the day's new issues found homes relatively easily, retail demand slipped as most long-term insured tax-exempt yields dipped below the benchmark 6% level. ``It makes me wonder how much additional buying power is left from retail unless we continue to see a slump in the stock market,'' said Micheline Jacques, a senior portfolio manager at TradeStreet Investment Associates Inc., a subsidiary of NationsBank Trust Investment Management.
