Weekly Summary: A Few New Deals As December Slowdown Nears

(Dec. 16, 2011) -- The municipal bond market is already getting into the end-of-the-year slowdown, even before the traditional quiet time from Christmas to New Year’s Day. New-issue activity in California dropped off this week and next week won’t see much activity either. One reason there isn’t a big year-end rush? Issuers don’t feel compelled to get deals done because low interest rates will still be available in January, based on current market conditions. Tax-exempt yields didn’t change much this week and U.S. Treasury rates dropped just a small amount.

In our preview of this week’s sales, we called Pasadena’s $30 million of water revenue refunding bonds a “benchmark” deal because it would show where a higher-quality issue is priced. Indeed, the AA and AA+ bonds provided the yields we would expect in the current market. A five-year bond yielded a tax-exempt 1.05%. This bond matures in June 2016 so maybe we should call it a four-and-a-half-year bond. The bond due in June 2017 yielded 1.20%. The bond maturing in June 2021 had a 5% coupon and was priced to yield about 2.12%. The 2026 maturity yielded 3.19% and the 2031 maturity, 3.74%.

The Kentfield School District sold $10 million of double-A general obligation refunding bonds this week. A bond due in August 2016 yielded a tax-exempt 1.20%. The 2021 maturity yielded 2.17%. The 15-year bond, due in 2026, yielded 3.19%. Other school district bonds on our calendar also priced this week.

The Gateway Unified School District sold $8 million G.O. refunding bonds with a single-A rating and Assured Guaranty Municipal backing. The five-year bond yielded 2.15% and the 10-year, 3.42%. The 13-year bond yielded 4.01%. The Lindsay Unified School District sold $3 million G.O. refunding bonds (A+), also with AGM insurance. The five-year bond yielded 2.05% and the 10-year, 3.32%.

The California Statewide Communities Development Authority brought a $95 million deal of student housing revenue bonds (University of California Irvine, East Campus Apartments, Phase One Refunding). The deal is on behalf of privatized on-campus student housing for U.C. Irvine. Moody’s Investors Service rates the bonds Baa2. A bond due in May 2017 yielded 3.10% and a bond due in May 2021 yielded 4.10%. A bond due in May 2031 yielded about 5.12%.

Puerto Rico port revenue bonds also priced this week. The portion not subject to the federal alternative minimum tax included a yield of about 4.80% in 15 years, though we haven’t check on the final pricing.

Weekly Summary: 2.06% in 10 Years, a Benchmark an Issuer Loves

(Dec. 9, 2011) -- Tax-exempt municipal bonds posted another decent week as rates on some generic measurements fell to levels last seen almost three months ago. Yields on decent quality, longer-term general obligation bonds dropped as much as two-tenths of a percentage point this week. Tax-exempt rates fell on other maturities and types of securities, though not as much. The attractive rates continue to spur refinancing of older bonds; few issuers could keep up with one triple-A school district, though, as it brought a refunding this week that yielded only 2.06% in 10 years. U.S. Treasury bond yields also were lower this week, though the decline was close to one-tenth of a percentage point. The ratio of tax-exempt yields to Treasuries has dropped to more “normal” levels after municipal bonds outperformed Treasuries in recent weeks.

A decent variety of deals priced this week, even though some were quite small. The deal of the week, at least from an issuer’s standpoint, has to be the $36 million general obligation refunding bond sale by the Tamalpais Union High School District. Standard & Poor’s rates the bonds AAA, citing among other things the wealthy and diverse tax base. The district, named after nearby Mount Tamalpais, serves an area in Marin County just a few miles north of the Golden Gate Bridge. The refunding had been on our calendar for quite a while and the district pulled the trigger at the right time from an issuer’s standpoint. A five-year bond (due in August 2016) featured a 5% coupon and was priced to yield a tax-exempt 0.98%. (If you want to use the February 2017 maturity as your five-year benchmark, the district’s bond yielded 1.05%. Several earlier maturities featured August and February due dates). The 10-year bond, due in August 2021, yielded 2.06%. A 15-year maturity yielded 3.05%. The longest maturity in the deal, 2028, yielded 3.28%. Those are interesting benchmarks on where the market is for a high-quality bond sale; great for the issuer, not so great for investors.

For a yield contrast, look at the $7 million Aa2 and A+ general obligation refunding bond sale by the Shasta-Tehama-Trinity Joint Community College District. Those bonds also mature in August of their respective due dates. The five-year maturity (2016) yielded a tax-exempt 1.77% and the 10-year, 3.07%. So the Tamalpais district paid about the same in 15 years as the Shasta college district yielded in 10 years. The college district’s 15-year bond yielded 3.94%.

How about yields if you go a little lower on the rating scale? The Southern Humboldt Joint Unified School District sold $5 million of general obligation bonds with A1 and A+ credit ratings. They also mature in August of their respective due dates. The five-year bond (2016) yielded 2.18% and the 10-year, 3.47%. A 14-year bond yielded 4.16%. The deal also included capital appreciation bonds.

The deals above are some good examples for general obligation bond comparisons. The week also featured sales of various revenue bonds. Sutter Health, through two financing authorities, sold $347 million of revenue bonds. The shortest maturity, in seven years, yielded 2.25%. A 10-year maturity yielded 3.05%. The 15-year bond yielded 4.02% and the 20-year, 4.57%. Some “conservative” investors tend to stick with G.O. bonds. A nonprofit health bond can provide some diversity, however, and the higher risk can be offset by sticking with shorter maturities.

The Imperial Irrigation District priced $23 million of A1 and AA-minus electric system revenue bonds.  A six-year bond yielded 1.57% and a 10-year, 2.62%. Utility bonds tend to benefit from being seen as “essential-purpose” securities, one reason the yields often are lower than on other types of revenue debt.

We mentioned the $4 million Mill Valley certificate of participation sale elsewhere this week because the underlying AA+ deal also included bond insurance from Assured Guaranty Municipal. A five-year bond yielded 1.50% and a 10-year, 2.75%. The 15-year maturity yielded 3.75% and the 20-year, 4.25%. Lease structures such as COPs, even from highly-rated issuers, tend to pay a bit more than a similarly-rated G.O. bond. Los Angeles County sold lease-revenue bonds this week and paid 1.67% in five years.

There were even some lower-rated examples this week. The $52 million San Diego C.F.D. No. 2 (Santa Luz) Improvement Area No. 1 Mello-Roos special tax refunding bonds carried a BBB+ rating from Standard & Poor’s . The five-year bond yielded 2.87%; the 10-year, 4.13%; the 15-year, 4.72%, and the 19-year, 5.10%. The rating is part of the reason these bonds yielded more. In addition, a Mello-Roos bond involves certain real estate-related risks that are unique to this type of security. Even so, many Mello-Roos deals are unrated, so those that do earn credit ratings tend to demonstrate a solid track record or feature a decent security cushion.

Puerto Rico, through a financing corporation, sold $438 million lease rental (appropriation) bonds with Baa2 and BBB-minus ratings. Interest on the bonds is tax-exempt for California residents and others in the U.S. A  15-year bond yielded 4.93% and a 20-year,  5.50%.

Weekly Summary: A Variety of Deals Mark Post-Thanksgiving Week

(Dec. 2, 2011) -- The municipal bond market handled the post-Thanksgiving jump in new deals relatively well this week. Tax-exempt rates generally rose a small amount. Part of the increase probably reflected rising U.S. Treasury rates. U.S. Treasury yields were up as much as one-fifth of a percentage point this week. By that measurement, tax-exempt bonds outperformed Treasuries.

Speaking of new bond sales, our summary this week is a bit abbreviated due to a scheduling issue. Our Upcoming Sales chart and our table of recent yields (below) haven’t been updated yet to reflect this week’s activity. We will get to that later Friday or by Saturday at the latest.

The California Department of Veterans Affairs priced its home purchase revenue bonds. The deal is rated in the double-A category, higher than the state’s own general obligation bonds.  A bond due in 2028 yielded a little higher than 4.5%.

We recently previewed a bond sale by the California Municipal Finance Authority on behalf of Emerson College, a Boston-based institution that is building a facility in Los Angeles. The bonds are rated Baa1 and BBB+. This week’s pricing produced a tax-exempt yield of around 5.1% in 2028. A bond due in 2042 yielded a bit more than 5.5%.

Cedars-Sinai Medical Center also priced revenue refunding bonds through the California Health Facilities Financing Authority. These bonds are rated A2 and A+. A 10-year maturity in that deal yielded just a shade under 3.47%.

The Puerto Rico $1 billion senior sales tax bond sale we mentioned previously also priced this week. The bonds, falling in the double-A category, qualify as federally and state tax-exempt for California residents. A 10-year maturity yielded 3.22%. A 15-year bond yielded 4.06%. A 20-year bond yielded 4.55%.

The Chula Vista Elementary School District sold certificates of participation with Assured Guaranty Municipal backing. They are rated A+ if the insurance backing isn’t considered. A five-year COP yielded 1.65% and a 10-year, 3.15%. A 15-year bond yielded 4.25% and a 20-year 4.70%.

A few other deals have priced this week and we will probably run a separate summary later to mention some yield examples.

Weekly Summary: One Sale Dominates Before Thanksgiving Pause

(Nov. 23, 2011) -- A short week ahead of the Thanksgiving break saw tax-exempt yields stay steady or drop a bit. We’re publishing our weekly summary early on Wednesday because the biggest new-issue pricing is wrapped up for the state’s public works deal.

To the extent tax-exempt yields keep following U.S. Treasury rates, prospects for the rest of the year suggest municipal bond yields will stay steady or even drop a little more. The U.S. Treasury market keeps benefiting from concern over government bonds in Europe. A sluggish U.S. economy also has helped keep fixed-income rates low. One thing that could test tax-exempt yields would be a surge in year-end supply of new sales. On the other hand, municipal bond funds have money to put to work and muni bond reinvestment income also needs to go somewhere.

The California State Public Works Board sold $295 million of lease revenue bonds this week, giving an otherwise slow few days something to note. As we noted the other day, the sale benefited the University of California and carried double-A ratings. That translated into lower yields than other recent Public Works Board sales with A2 and BBB+ ratings.

This week’s sale carried 4% and 5% coupons on the five-year bond, which was priced to yield 1.64%. The 10-year bond was priced to yield 3.06%. The 15-year bond yielded 3.91% and the 20-year, 4.37%. A lower-rated Public Works Board sale earlier in November yielded at least one full percentage point higher on some of those earlier maturities.  

Mix of New Sales Keeps Market Going Prior to Thanksgiving Pause

(Nov. 18, 2011) -- The Europe debt crisis continues to hover in the background as a factor affecting U.S. fixed-income markets. U.S. Treasury bonds have benefited from the concern as a safe haven. This week the 10-year and 30-year Treasury yields dropped roughly one-tenth of a full percentage point. Tax-exempt bonds generally moved in the opposite direction, with yields rising a bit. In the new-issue market, California saw a good mix of new municipal bond sales even if some of the deals were small in size. New pricings will drop off next week as Thanksgiving nears.

The Southern California Public Power Authority priced $62 million of revenue refunding bonds for Magnolia Power Project A. They are rated A1 and AA-minus. A five-year bond yielded a tax-exempt 1.66% and a 10-year, 2.95%.

Guam sold $235 million of business privilege tax bonds that we discussed recently. The bonds are noteworthy because they earned A and A-minus ratings from Standard & Poor’s and Fitch Ratings, respectively. The dedicated-tax security gave the bonds a far higher rating than Guam’s general obligation debt. A five-year bond yielded a tax-exempt 2.48%, a 10-year bond yielded a tax-exempt 3.68%, and a 15-year, 4.48%. The 19-year bond yielded 4.75% and the 30-year, 5.03%. A note of explanation—the bonds are due on January 1 so the 10-year bond we cite matures Jan. 1, 2022. That’s much closer to a 10-year bond than an 11-year maturity. We do the same for other example maturities as well. The Guam bonds are federal and state tax-exempt for California residents.

Most of the $398 million Puerto Rico Sales Tax Financing Corp. bond sale we previewed recently was packed into a single 32-year maturity. The tax-exempt bonds with a coupon of 5% were priced to yield 5.10%. The subordinate sales tax bonds are rated A1 and A+.

The California Municipal Finance Authority sold $11 million of revenue bonds on behalf of the Family HealthCare Network. The bonds are insured under the Cal-Mortgage program, giving them a rating equivalent to California’s general obligation grade. A five-year maturity yielded 2.60% and a 10-year, 4.00%. A 15-year bond yielded 4.75% and an 18-year, 5.00%. A 30-year maturity yielded 5.625%. The California Municipal Finance Authority also sold $13 million of lease revenue bonds on behalf of the Sacramento Metropolitan Fire District. They carry an AA-minus rating. A five-year maturity yielded 2.46%; a 10-year, 3.85%; a 15-year, 4.68%, and a 30-year, 5.27%.

The Lake Elsinore Public Financing Authority sold $1.4 million of revenue bonds (1996 Series E refunding). The five-year bond yielded 3.75% and the 10-year, 5.125%. The 15-year maturity yielded 5.50%. The bonds were not rated.

The Merced Union High School District sold $30 million of general obligation bonds. They were capital appreciation bonds rather than current-interest bonds, carrying an Aa3 credit rating. A couple sample yields included 4.75% in 10 years and 5.97% in 16-years. About $5 million of the sale came as 40-year bonds due in 2051 rather than the usual longest maturity of 30 years. The 2051 maturity yield was 7.42%.

The Pacific Grove Unified School District sold $5 million general obligation refunding bonds (rated AA) with a tax-exempt 1.90% yield in seven years and 2.73% in 10 years. The 15-year bond yielded 3.83% and the 20-year, 4.30%.

The Perris Union High School District sold $42 million of unrated special tax Mello Roos bonds with tax-exempt yields of 3.50% in five years, 4.75% in 10 years, 5.45% in 15 years, 5.85% in 19 years, and 6.15% in 30 years.

The California Municipal Finance Authority sold $5 million of revenue refunding bonds on behalf of St. John’s Well Child & Family Center. These bonds are insured by the Cal-Mortgage program, giving them ratings on par with state general obligation bonds. The 10-year tax-exempt bond yielded 4.00%, the 20-year, 5.375% and the 30-year, 5.65%.

There were a handful of other sales going on this week that we haven’t yet chased down the final yields. For example, the William S. Hart Union High School District offered general obligation bonds that had been on our calendar for some time. The sale included a mix of current-interest and capital appreciation bonds. For the current-interest bonds, with regular semiannual interest payments, the five-year bond looked to be yielding in the neighborhood of 1.75% and the 10-year, somewhere around 3%. The bonds are rated Aa2 and A+.

Italy Helps U.S. Bonds; San Francisco a Benchmark for New Sales

(Nov. 10, 2011) -- For the second straight week, we’re posting our summary of new-issue activity a day early. This time, however, it is because of the holiday-shortened week. Veterans Day is marked on Friday. The story driving rates so far this week is once again coming out of Europe, with Italy’s financial problems in the spotlight. U.S. Treasury bond yields dropped as investors favored safer securities; the rally also helped municipal bonds and tax-exempt rates followed lower on Wednesday. Thursday might end up being a quieter day ahead of the holiday, at least for municipal bonds.

San Francisco led California’s new-issue activity this week with a $336 million general obligation bond refunding. The city and county took competitive bids Wednesday for the bonds, and the deal provides a benchmark of sorts for a higher-quality sale. Moody’s Investors Service rates the bonds Aa2, Standard & Poor’s, AA, and Fitch Ratings, AA-minus. The bonds mature on June 15 of their respective due dates. The bond due in 2021 yielded a tax-exempt 2.49%. The 15-year bond (2026) yielded 3.58%. The five-year maturity wasn’t reoffered but we believe the yield ended up in the neighborhood of 1.35%.

The West Contra Costa Unified School District offered $100 million general obligation bonds with slightly lower credit ratings (Aa3 and A+). Many of the maturities, not all, included bond insurance from Assured Guaranty Municipal. A 10-year insured bond in the deal yielded a tax-exempt 3.60% and a 15-year, 4.40%. A 21-year bond yielded 4.70%. The 30-year maturity in the deal featured an uninsured portion and an AGM-insured portion. The uninsured 30-year bond yielded 5.07% and the insured, 4.90%. Seasoned market participants still recall that this issuer was once known as the Richmond Unified School District, a name under which it once sought bankruptcy protection. The district has certainly made positive financial progress since its problems two decades ago, even if the history stays in the back of some investors’ minds.

Loyola Marymount University sold tax-exempt bonds through the California Educational Facilities Authority. The $22 million sale carried an A2 rating from Moody’s. A five-year bond yielded a tax-exempt 2.29%, a 10-year, 3.48%, and a 13-year, 4.00%.

The Brea Olinda Unified School District brought a small $4 million G.O. bond refunding to market (rated AA-minus by S&P). The five-year bond yielded 1.74% and the nine-year, 2.91%. The Ventura County Office of Education priced $12 million refunding certificates of participation with an AA-minus rating and Assured Guaranty Municipal insurance. Tax-exempt yields included 2.19% in five years; 3.48% in 10 years; 4.40% in 15 years, and 4.78% in 15 years.

The Rady Children’s Hospital bonds sold through the California Health Facilities Financing Authority also have been priced. The $100 million in revenue bonds are rated A+. We aren’t sure if these were the final tax-exempt yields, but the levels we have are 2.57% in five years, 3.92% in 10 years, 4.73% in 15 years, 5.17% in 20 years, and 5.38% in 30 years.

Europe Helps U.S. Bonds; State Public Works Took Center Stage

(Nov. 3, 2011) -- The big story in the fixed-income markets this week revolves around Europe and continuing questions about Greece’s debt crisis. This led to a powerful rally on Tuesday in U.S. Treasury securities; tax-exempt bonds also rallied in response. Yields dropped Tuesday, following Treasuries lower. On Wednesday the municipal market didn’t move much. If anything, yields rose a bit. Amid all this broader activity, several new deals in California priced. We usually run this summary on a Friday, but need to finish it a day earlier due to a scheduling issue this week.  We will add any necessary updates later.

The California State Public Works Board led the way this week with $497 million of lease-revenue bonds that are rated A2 and BBB+. A five-year bond yielded a tax-exempt 2.75%, a 10-year, 4.19%, a 15-year, 4.91%, and a 20-year, 5.20%. Those yields are similar to, though a bit lower, than what the Public Works Board paid on lease-revenue bonds in October.

The City of Marysville priced $112 million of revenue bonds on behalf of the Fremont-Rideout Health Group. These bonds carried A2 and A ratings. The health revenue bonds provided yields in the neighborhood of what the Public Works Board paid. A 10-year Fremont-Rideout Health tax-exempt bond (due in January 2022) yielded 4.25%, a 15-year (due in January 2027), 4.95%, a 20-year (due in January 2032), 5.25%, and a 30-year maturity (due in January 2042), 5.40%. We wanted to add all those maturities because we are using the January 1 maturity dates in the following year for our “benchmarks” (10 years, 15 years, etc.). The Public Works Board deal still could use 2021 for a 10-year maturity because it matures on December  1.

To provide some perspective from a higher-rated deal, the West Basin Municipal Water District priced $60 million of Aa2 and AA-minus refunding revenue bonds. The longer maturities came in with yields more than one full percentage point lower than the lower-rated deals discussed above. The earliest maturity for the West Basin deal, in 12 years, yielded 3.24%. The 15-year maturity with a 5% coupon was priced to yield 3.61% and the 20-year, 4.09%.

The Western Placer Unified School District sold $9 million single-A certificates of participation that also featured insurance from Assured Guaranty Municipal. The five-year COP yielded a tax-exempt 3.10% and a 15-year, 4.80%. The 20-year COP yielded 5.25% and the 30-year, 5.40%. There wasn’t a 10-year maturity in the deal; the seven-year yielded 3.55%.

San Francisco took competitive bids yesterday for $86 million of refunding certificates of participation tied to the Moscone Center.  A five-year COP yielded 1.96% and a 10-year, 3.09%. The longest maturity in the deal, 13 years, yielded 3.54%. These COPs were rated Aa3 and AA-minus.

Go South, Young Man, to Single-A for This Week's Juicier Yields

(Oct. 28, 2011) -- Municipal bond yields didn’t change all that much this week, generally rising a small amount. In contrast, U.S. Treasury bond yields rose roughly one-quarter of a percentage point. Investors could look at some single-A offerings for yield opportunities, primarily in health-related deals. Municipal bond funds have now seen “inflows” for seven out of the last eight weeks, including more than $300 million in the week ended October 26, according to Lipper FMI.

The Fairfield-Suisun Unified School District sold $32 million of general obligation refunding bonds with an Aa2 credit rating. A five-year bond yielded a tax-exempt 2.00% and a nine-year, 3.20%.  The 11-year bond yielded 3.52%. There were 10-year bonds, too, but we don’t seem to have the final yield. It was in the ballpark of 3.35%. The 15-year maturity yielded an even 4.00%.

California’s $439 million of economic recovery refunding bonds were packed into two maturities. The five-year yielded a tax-exempt 0.93% and a 10-year, 1.10%. These bonds were rated Aa3 and A+ and did far better than a lower-rated state general obligation bond sale a week earlier, as our Research page mentioned the other day.

The Children’s Hospital of Orange County brought a $107 million single-A revenue bond sale through the California Health Facilities Financing Authority. A five-year bond yielded a tax-exempt 2.62% and a 10-year, 3.98%. The 15-year bond yielded 4.63% and the 20-year, 5.20%. A 30-year maturity yielded 5.40%.

Catholic Healthcare West sold about $350 million of revenue bonds through CHFFA.  The bonds are rated A2, A and A+ (Fitch). The five-year maturity yielded 2.64% and the 10-year, 4.04%. A bond due in 2027 yielded 4.79% and a 30-year maturity, 5.35%.

The California Infrastructure and Economic Development Bank priced $120 million of revenue bonds on behalf of the J. David Gladstone Institutes, a nonprofit biomedical research firm. Standard & Poor’s rates them A-minus and Fitch, A. The earliest maturity, in six years, yielded a tax-exempt 2.94%. A 10-year bond yielded 4.04%.  The 15-year bond yielded 4.80% and the 20-year, 5.30%.

The San Lorenzo Valley Unified School District sold about $5 million of general obligation refunding bonds with an Aa2 rating. Tax-exempt yields included 1.91% in five years and 3.00% in nine years.

The Lincoln Public Financing Authority sold $42 million of assessment revenue bonds on behalf of Twelve Bridges Assessment District No. 95-1. S&P rates them A-minus, and the deal also included insurance from Assured Guaranty Municipal. A five-year bond yielded 2.92% and a 10-year, 4.05%. The 15-year bond yielded 4.63%.

The Poway Unified School District priced a small unrated Mello-Roos bond issue on behalf of CFD No. 10. A 10-year bond yielded a tax-exempt 5.00% and a 20-year bond, 6.05%.

Tax-exempt Rates Drop; State's Sale Took Spotlight From Others

(Oct. 21, 2011) -- Tax-exempt yields dropped this week, ending a recent string of rate increases. Some longer-term general obligation bonds probably dropped close to one-tenth of a percentage point. Not all municipal bonds shared in the decline equally; for example, certain revenue bonds didn’t change much if at all. U.S. Treasury yields didn’t change very much if you look at where they closed Thursday compared with a week earlier.

California’s big general obligation bond sale dominated the new-issue market this week. We discussed this sale and compared it with some of this week’s other new-issue yields on our Research page on October 20. As a result, we aren’t going to repeat that discussion here.

There were a handful of other sales this week. Yesterday, for example, the Amador County Unified School District took bids on $5 million of general obligation bonds with an Aa3 rating. The five-year bond yielded 1.93%, or 35 basis points less than what the State of California paid this week on the same maturity. Amador County school’s 10-year bond yielded 3.20%, or a half-point less than what the state paid on its G.O. debt for the same maturity. Finally, Amador County school’s 15-year bond yielded an even 4.00%. California paid 4.39% on a 15-year bond this week.

The Jurupa Unified School District sold $7 million of certificates of participation with a single-A rating. The five-year COP yielded 2.65% and the 10-year, 4.23%. The COPs were insured by Assured Guaranty Municipal. Certificates of participation aren’t viewed on the same footing, in terms of security, as G.O. bonds. That helps explain the higher yields. The Jurupa district also was selling G.O. refunding bonds with a little higher credit rating. We still have to double-check the final yields on that G.O. sale; we believe the five-year maturity was around 2.30% and the 10-year around 3.80%.

A Poway Unified School District financing authority sold $35 million of special tax (Mello-Roos) refunding bonds for certain 4S Ranch and Torrey Highlands districts. These bonds were not rated. A five-year bond yielded 3.25% and a 10-year, 4.45%. The 15-year bond yielded 5.10% and the 20-year, 5.50%.

Tax-exempt Rates Rise; Yields Sort of Sweet on BBB+ State Credit

(Oct. 14, 2011) -- Tax-exempt yields rose again this week, though not by a lot. In contrast, U.S. Treasury yields rose about two-tenths of a percentage point on both the 10-year and 30-year bonds. A handful of weeks ago we griped about high-quality five-year municipal bonds yielding 0.85% in the new-issue market. The last few days higher-quality municipal revenue bonds paid closer to 1.50% in five years. However, current tax-exempt rates remain relatively low.

This week’s example of a higher-quality revenue bond was provided by a $235 million sale from the Los Angeles County Metropolitan Transportation Authority. The first-tier Proposition A sales tax revenue bonds carried a triple-A rating from Standard & Poor’s and Aa2 from Moody’s Investors Service. The sale was packed into earlier maturities. A five-year bond yielded a tax-exempt 1.58% and a seven-year, 2.20%. A three-year maturity yielded 0.89%.

Local school districts have been regular participants in the new-issue market and this week wasn’t any different. The Corona-Norco Unified School District sold $22 million of general obligation bonds with Aa2 and AA-minus credit ratings. A five-year bond yielded a tax-exempt 1.91% and a 10-year, 3.15%. A 16-year maturity yielded 4.40%.

Assured Guaranty Municipal has insured quite a few recent local school bonds and it backed this week’s $42 million general obligation sale by the Lodi Unified School District. Without the insurance, the “underlying” ratings on the Lodi school bonds are A+ and AA-minus. The five-year bond yielded a tax-exempt 2.16% and a 10-year, 3.80%. A 15-year bond yielded 4.55%.

The California State Public Works Board sold almost $500 million of lease-revenue bonds this week. Two series were rated BBB+ and A2; Moody’s rated one series for California State University projects Aa3. As we expected, yields were relatively juicy. Even on a bond due in 15 years, tax-exempt yields were at 5% and reached 5.34% in 20 years (though rates were a little lower on the CSU series, including 4.87% in 15 years). As another example, lease-revenue bonds tied to a state prison project yielded a tax-exempt 2.72% in five years and 4.30% in 10 years.

Weekly Summary: Tax-exempt Rates Jump; Borrowers Still Happy

(Oct. 7, 2011) -- Tax-exempt yields jumped this week, making rates a little more palatable to investors. Yields had fallen to ridiculous levels two weeks ago after the Federal Reserve said it would try to push longer-term rates lower. Since then, however, tax-exempt yields have been rising. In the last two days alone some generic measurements of certain maturities showed a quarter-point increase. Make no mistake about it, this is still an issuer’s market. In fact, all the recent added refunding volume might be a factor in helping to push tax-exempt rates a bit higher. Borrowers are trying to refinance whatever they can. U.S. Treasury yields bounced around in recent days but didn’t change much from the level recorded a week ago.

The Ohlone Community College District priced $80 million of general obligation bonds and provided a good sense of yield levels for a decent double-A deal (Aa2 and AA). The 10-year bond yielded a tax-exempt 2.84%. By comparison, local school districts with lower ratings (such as A1 and A+) sold G.O. bonds this week with Assured Guaranty Municipal insurance. Their 10-year bonds paid in the range of 3.30% to 3.45% and even higher. We discussed those insured school deals here the other day and won’t include them again in this market summary. The Ohlone college district, at the southern part of San Francisco Bay, has a main campus in Fremont and a newly-built campus in Newark. The Ohlone 15-year bond yielded 3.73%, the 20-year, 4.23%, and the 30-year, 4.40%. A shorter maturity, due in seven years, yielded 2.12%.

Another smaller school district deal carried AGM insurance this week. Mountain View School District (School Facilities Improvement District No. 1) sold $5 million general obligation refunding bonds that, without the insurance, are rated A+ by Standard & Poor’s. The deal yielded a tax-exempt 2.17% in five years, 3.59% in 10 years, and 4.31% in 15 years.

The double-A deal for Trinity Health we mentioned earlier this week was priced, with all of the $106 million deal packed into a 30-year maturity. The tax-exempt yield was 5.00%. The bonds were issued through the California Statewide Communities Development Authority. A few other deals priced this week; we haven’t yet tracked down all the final yields for this summary.

Weekly Summary: Treasury Yields Rise, Muni Rates Up a Little

(Sept. 30, 2011) -- Tax-exempt yields followed Treasury rates higher this week, after a powerful rally a week earlier had pushed them lower. The 10-year and 30-year Treasury securities rose roughly a quarter-point this week. Municipal yields rose by less, closer to one-tenth of a full percentage point if that.

California’s new-issue municipal market was relatively busy this week, led by a string of refundings to take advantage of current low rates. An important note: Due to a separate deadline we are only listing a handful of these deals below and will add some more over the weekend. We also haven’t updated the yield table of recent sales below and will do so over the weekend.

The deals were led by a $408 million general obligation bond refunding from the Los Angeles Unified School District. Moody’s Investors Service rates the bonds Aa2 and Standard & Poor’s, AA-minus. A five-year maturity yielded a tax-exempt 1.47% and a 10-year, 2.87%. The longest maturity, a 13-year bond, yielded 3.40%.

In one of the larger competitively-bid sales this week, the Livermore-Amador Valley Water Management Agency offered $105 million of sewer revenue refunding bonds. Moody’s rated them Aa2 and S&P, A+. The five-year bond yielded 1.87% and the 10-year, 3.09%. The 15-year bond yielded 4.00% and the 20-year, 4.50%.

Berkeley Unified School District priced $56 million of general obligation refunding bonds, including a 1.55% yield in five years. Certain longer maturities included Assured Guaranty Municipal bond insurance, such as the 15-year bond that yielded 3.70%. Standard & Poor’s rated the bonds AA-minus.

The Rosemead School District sold $10 million of general obligation refunding bonds with an A+ rating from S&P. Assured Guaranty Municipal also insured the deal. A five-year bond yielded 1.97% and a 10-year, 3.39%. A 15-year bond yielded 4.16% and a 20-year, 4.72%. The Fresno Unified School District sold $106 million of G.O. debt, with a mix of current-interest and capital-appreciation bonds. A 10-year maturity yielded 3.09%.

The Camrosa Water District sold $10 million of water and wastewater revenue bonds. They were rated A1 and A+ (following a one-notch upgrade by S&P). The five-year bond yielded 1.82% and the 10-year, 3.22%. A 15-year bond yielded 4.25%.

Weekly Summary: Treasury Yields Plunge, Drag Muni Rates Lower

(Sept. 23, 2011) -- Just when you think yields couldn’t get any longer, along comes “Operation Twist.” That is what some call the Federal Reserve’s plan to buy longer-term U.S. Treasury securities to help keep interest rates lower. The yield on the 30-year Treasury bond plummeted by more than a half-point this week, falling to below 3%. The 10-year Treasury was down almost four-tenths of a percentage point to a bit less than 1.75%. The Federal Reserve’s plan, in response to concern over “significant downside” risks in the economic outlook, can’t get much credit for this week’s rate drop. The broader concern over a weak economy triggered stock selling and a run into so-called “safer” havens, including Treasuries. The Federal Reserve’s view on the economy had a far bigger impact on investors than a program to buy longer-term Treasuries.

Tax-exempt yields followed Treasuries lower, though the move wasn’t as dramatic. Longer-term rates fell by as much as two-tenths of a percentage point. Some generic measurements of yields continue to hover near lows last seen in the late 1960s. Shorter-term muni yields also declined, just not as much. The ratio of the 30-year tax-exempt to the 30-year U.S. Treasury moved above 120%. In more “normal” times the 30-year ratio would be closer to 90% and lower. On a relative basis something usually gives when this ratio goes to a strange level; either Treasury yields will rise relative to tax-exempt rates or municipal bonds will rally and drop more relative to Treasuries. Income-oriented investors would prefer to see Treasury yields rise relative to munis so tax-exempt rates don’t go even lower.

The actual impact of all this might be difficult to gauge in the new-issue market until some higher-rated deals come to market in the next week or two. California’s new-issue market saw some single-A credits such as the state this week; they also benefit from lower rates, just not as much as higher-rated issuers.

The State of California’s $2.4 billion general obligation bond sale was the big dog in the new-issue market (rated A1 and A-minus). We have already written about it and will simplify repeat sample yields: 1.61% in five years, 3.17% in 10 years, 4.14% in 15 years, 4.57% in 20 years, and 4.80% in 30 years. As we noted a few days ago, the state paid almost a full point more in 10 years than some higher-rated issuers recently paid on new deals.

In contrast, the Novato Unified School District sold G.O. bonds with double-A ratings this week. We didn’t follow up yet to get the final yields but we believe the 10-year maturity was somewhere in the neighborhood of 2.25%; again, that’s almost a full-percentage point less than what the state paid.

In competitive sales yesterday, the Riverside Unified School District brought $46 million of general obligation refunding bonds with Aa2 and A+ ratings. The deal also included a guarantee on most maturities from Assured Guaranty Municipal. The 10-year tax-exempt yield was 2.70%, almost a half-point less than what the State of California paid. The 15-year Riverside school yield was 3.65%, also about a half-point less than the state’s yield. We’re still waiting to track down the five-year yield because it wasn’t initially re-offered; the Riverside school deal paid 1.02% in four years and 1.70% in six years. However, we should add that the Riverside deal matures in February of each year so the “10-year” is more like nine-and-a-half years. The California deal included September maturities.

The Yosemite Unified School District yesterday competitively sold $8 million of G.O. refunding bonds with a single-A rating and AGM bond insurance.  The five-year maturity yielded 1.72% and the 10-year, 3.00%. A 14-year maturity yielded 3.80%. Assured Guaranty Municipal also backed $6 million of Buena Park School District G.O. bonds that sold this week (underlying rating of AA-minus). The Buena Park school deal yielded 1.47% in five years and 2.78% in 10 years. The 14-year maturity yielded 3.61%.

A sale of about $100 million also was pricing for Chapman University. The A2 bonds are being issued by the California Educational Facilities Authority. A 20-year tax-exempt yield was at 4.55%, about what the State of California had to pay. We aren’t sure if we have final yields yet in the Chapman University deal and will add them to the chart below when we do.

Weekly Summary: Five-Year Tax-exempt Yields of 0.95% ... for Some

(Sept. 16, 2011) -- A surge in new municipal bond sales didn’t push tax-exempt yields much higher this week. Tax-exempt rates were at best a tiny bit higher. Higher-quality issuers continue to benefit from low rates and an issuer’s market, as evidenced by five-year maturities yielding less than 1% tax-exempt. U.S. Treasury yields increased a bit more than muni rates this week, with the 10-year maturity up one-tenth of a percentage point. President Obama’s jobs bill proposal to curtail tax-exempt income for certain higher-income investors (capping the tax rate benefit at 28%) didn’t rattle bond trading; there is skepticism the plan will ever move forward.

The California State University sale of systemwide revenue bonds was among the deals in the spotlight this week, as the state and its related entities finally begin returning to the new-issue market. The sale was increased to $430 million because of the opportunities afforded by low rates. The bonds are rated Aa2 and A+. Standard & Poor’s changed its outlook to “positive” from “stable” because of the CSU system’s solid financial management. Investors could choose a 3% coupon or 5% coupon for the five-year maturity, which was priced to yield a tax-exempt 1.40%. The 10-year maturity with a 4% or 5% coupon was priced to yield 2.77%. The 15-year maturity yielded 3.64% and the 20-year, 4.23%. A 31-year maturity yielded 4.60%. (The 11-year maturity was the first to crack a 3% yield, with 3.00% even. The 19-year maturity was the first to pass 4% tax-exempt, yielding 4.04%.)

Among high-quality sales, the Metropolitan Water District of Southern California was in the market with $157 million of water revenue refunding bonds. They are rated Aa1 and AA+ by Moody’s Investors Service and Fitch Ratings, respectively. Standard & Poor’s grades them AAA. The five-year bond yielded 0.95%. The 10-year bond yielded 2.27%, a full half-point lower than the California State University sale mentioned above. The 15-year maturity yielded 3.24% and a 21-year bond, 3.87%.

The Orange County Sanitation District priced $148 million of wastewater revenue refunding bonds with an AAA rating from S&P and Fitch. The five-year bond yielded 0.95% tax-exempt. An 11-year maturity yielded 2.47%. A 15-year bond yielded 3.21%.

Another high-quality deal, $48 million of sales tax revenue refunding bonds from the Santa Clara Valley Transportation Authority, carried Aa2 and AA ratings from Moody’s and Fitch, respectively, and AAA from S&P. The five-year maturity yielded (you guessed it) 0.95% tax-exempt. The 10-year maturity yielded 2.25% and the 15-year, 3.26%.

So how does an investor get any added yield in today’s market? The opportunities, such as they are, involve accepting lower ratings and types of securities viewed as somewhat weaker in terms of creditworthiness (certificates of participation, for example). Santa Cruz County fit the bill in two ways this week, offering $6 million certificates of participation with an A2 rating. The five-year COP yielded a tax-exempt 2.00%, or more than twice the yield of some of the higher-quality bonds cited above. The 10-year maturity yielded 3.47% and the 15-year, 4.47%. A 20-year COP yielded 4.85%. A single-A COP sale by a Tulare – Porterville school financing authority also yielded 2.00% in five years. An eight-year maturity yielded 3.12%. Assured Guaranty Municipal insured the school COPs.

The Sacramento Municipal Utility District sold $326 million of electric revenue refunding bonds with A1 and A+ ratings. The five-year bond yielded 1.52% and the 10-year, 2.84%. A 15-year maturity yielded 3.77%. Although these bonds fell in the single-A category, electricity is seen as an “essential purpose” and that helps draw some risk-averse investors who otherwise stick to higher-rated bonds.

Huntington Beach’s $36 million sale of lease-revenue bonds yielded 1.62% in five years and 2.95% in 10 years. A 15-year bond yielded 4.09%. The bonds are rated Aa3 and AA.

The Ojai Unified School District sold $5 million of general obligation bonds with an A+ rating and insurance from Assured Guaranty Municipal. A five-year bond yielded 1.67% and a 10-year, 2.95%.

Five-Year Tax-exempt Yield of 0.85%? Read Weekly Summary, Weep

(Sept. 9, 2011) -- Much has been made recently about the yield on the U.S. Treasury 10-year security, specifically focusing on the fact it has hovered around 2.00% and even closed a shade lower (1.99% the other day). The new-issue market in California this week had its own parallel horror story as one high-rated sale offered a five-year maturity at less than 1% tax-exempt (0.85% to be specific). At least the Taxable Equivalent Yield for many buyers is still above 1% but that doesn’t provide much solace. The detail of that pricing is below. In the broader tax-exempt market rates dropped this week, maybe close to one-tenth of a percentage point on some maturities. U.S. Treasury yields dropped even more; for example, the 30-year Treasury dropped by two-tenths of a percentage point. The new-issue market wasn’t tested by any big deals in California.

The Tiburon-based Reed Union School District took bids yesterday on a $27 million general obligation refunding bond sale. Standard & Poor’s rated the bonds AAA. A five-year maturity with a 4.00% coupon was priced to yield a tax-exempt 0.85%. A 10-year bond with a 4.00% coupon was priced to yield 2.07%. The 15-year maturity didn’t even offer 3% tax-exempt; it came in at 2.92%. The longest maturity in the sale, 17 years, yielded 3.15%.

The San Diego County Water Authority popped into the market with $95 million of water revenue refunding bonds. We thought this deal might price before Labor Day but sometimes market conditions, such as a temporary rise in rates, affect the timing of refunding deals. The bonds are rated Aa2 and AA+. A 10-year bond with a 5.00% coupon was priced to yield 2.45%. A 17-year maturity yielded 3.64%. The 20-year bond yielded 3.92%.

The Chaffey Joint Union High School District priced $44 million of general obligation refunding bonds. They are rated Aa2 and AA-minus. A five-year maturity with a 4.00% coupon was priced to yield a tax-exempt 1.10%. A 10-year bond with a 5.00% coupon was priced to yield 2.45%. The 15-year maturity with a 5.00% coupon was priced to yield 3.62%.

The Shoreline Unified School District sold $5 million of general obligation refunding bonds with a double-A rating from Standard & Poor’s. The five-year bond was priced to yield 1.32% and the 10-year, 2.65%. The 15-year maturity yielded 3.64%. The Shoreline district is based in Tomales in Marin County.

A small $2 million G.O. refunding bond from the Sebastopol Union School District offered a little more yield thanks to an A1 rating. However, the bonds also were guaranteed by Assured Guaranty Municipal, helping keep yields a bit lower. The five-year bond yielded 1.67% and the 10-year, 2.95%.

The City of Palo Alto sold $17 million of high-quality utility revenue refunding bonds (Aa2 and AAA ratings). We haven’t yet tracked down the yields on certain maturities that weren’t reoffered. A four-year bond yielded a tax-exempt 0.62% and a nine-year, 2.00%. The 15-year maturity yielded 3.02%.

Tax-exempt Yields Rose As Pre-Labor Day Activity Slowed Down

(Sept. 2, 2011) -- Tax-exempt yields generally rose by a few basis points this week during a lackluster few days prior to the holiday-shortened Labor Day week. In contrast, U.S. Treasury rates declined. On a relative basis, municipal bonds are an attractive buy versus Treasuries using historic ratios as a guide. However, tax-exempt yields also are still way down after a powerful rally, and some smaller buyers no doubt find them unattractive.

The West Basin Municipal Water District sold $34 million of refunding revenue bonds with Aa2 and AA-minus ratings. The West Basin district’s service area includes 17 cities in Los Angeles County. A six-year maturity yielded a tax-exempt 1.50% and a 10-year, 2.76%. The longest 13-year bond yielded 3.52%.

The Modesto Irrigation District priced $33 million of electric revenue refunding bonds. These bonds were rated A2 and A+. A 15-year maturity yielded 4.27% and a 20-year, 4.75%.

A $4 million general obligation refunding deal from the Mesa Union School District in Somis yielded 1.39% in five years and 2.86% in 10 years. A 16-year bond yielded 4.04%. The bonds were rated AA and AA- by S&P and Fitch, respectively.

The Palmdale Elementary School District priced $15 million of general obligation refunding bonds with an Aa3 rating. The five-year maturity yielded 1.69% and the 10-year, 3.12%.

It was again a relatively quiet week for new bond issuance and our summary of market activity is intentionally short. Look for longer updates to resume beginning in mid-September, when we expect new sales to pick up.

Tax-exempt Yields Rose Following Sharp Drop; Dog Days Are Here

(Aug. 26, 2011) -- Tax-exempt yields generally rose across the board this week. Some measurements of longer-term maturities indicated a quarter-point increase, though the actual changes in secondary trading varied depending on the type of bond, credit quality, and maturity. The rate rise wasn’t a surprise after a powerful rally drove yields down to levels that sent some investors to the sidelines, if they weren’t already there in recent weeks. U.S. Treasury rates also rose in recent days.

The dog days of late August might keep the municipal market a bit stagnant next week, ahead of the holiday-shortened week for Labor Day. Then the next question will be just how much new sales volume will pick up in the late summer and fall. The return of the State of California to the new-issue market ensures a bit of a sales pop in our region.

The San Francisco Airport Commission led this week’s sales with more than $350 million of tax-exempt and taxable revenue refunding bonds (part of the tax-exempt sale also was subject to the federal alternative minimum tax). The bonds are rated A1 and A+. An 11-year maturity for the non-AMT portion was priced to yield 3.39% and a 15-year yielded 4.15%. A 19-year non-AMT bond yielded 4.49%.

In contrast, the airport commission’s tax-exempt bonds subject to the AMT yielded 4.09% in 11 years, 4.80% in 15 years, and 5.09% in 19 years.

We might not add anything more to this summary later on Friday because it was a relatively quiet week for new bond issuance.

Tax-exempt Rates to LBJ Level; New Sales Jumped During Week

(Aug. 19, 2011) -- Tax-exempt yields kept falling again this week, knocking another one-tenth of one percentage point off rates from a week earlier. One measurement of change, the Bond Buyer 11-Bond General Obligation Index of 20-year maturities, fell to its lowest level since when President Lyndon Baines Johnson was in office. It hasn’t been this low since the spring of 1967. Some generic measurements of the highest-grade 10-year tax-exempt yields are at all-time lows, period.

It is an issuer’s market and several of them jumped into California’s municipal bond market this week. The California Department of Water Resources led the way with $960 million of power supply revenue bonds. Moody’s Investors Service rates the bonds Aa3 and Standard & Poor’s, AA-minus. Fitch Ratings grades them AA. A seven-year bond yielded a tax-exempt 1.92% and a 10-year, 2.66%. The department entered the business of power procurement and related power bond sales in the aftermath of California’s energy crisis a decade ago. The bonds are backed by charges on customers of investor-owned utilities; the creditworthiness has improved because the state’s exposure to power market volatility has decreased.

The Southern California Public Power Authority priced $157 million of revenue bonds for the Milford Wind Corridor Phase II Project in Utah. S&P and Fitch rate the bonds AA-minus. A five-year bond yielded 1.22% and a 10-year, 2.74%. The 15-year maturity yielded 3.72% and the 20-year, 4.14%.

The Water Replenishment District of Southern California issued $69 million of revenue certificates of participation. This deal is noteworthy for AA+ ratings from Standard & Poor’s and Fitch. The five-year bond yielded 1.40% and the 10-year, 2.96%. The 15-year bond priced at 4.22%, the 20-year maturity yielded 4.65%, and the 30-year, 5.00%.

The University of California Regents sold $355 million of tax-exempt general revenue bonds with Aa1 and AA ratings (Fitch graded them AA+). We don’t think a repricing changed yields much but we didn’t check the final numbers. The 10-year maturity was probably going to yield in the neighborhood of 2.60% and the 20-year, not much off 4.00%.

The Cucamonga Valley Water District priced $109 million of water revenue refunding bonds carrying Aa3 and AA-minus ratings. Assured Guaranty Municipal guaranteed the bonds. A five-year bond yielded 1.20% and a 10-year, 2.66%. A 15-year yielded 3.83% and a 20-year, 4.25%.

Assured Guaranty Municipal also backed a Mojave Unified School District S.F.I.D. No. 1 $10 million general obligation bond with an underlying A+ grade. AGM also guaranteed an Aromas-San Juan Unified School District $8 million G.O. bond sale (with an underlying single-A grade). The yields on those sales were in the ballpark of 1.90% in five years and 3.30% in 10 years. In contrast, a Roseville Joint Union High School District G.O. bond sale with an AA-minus rating yielded roughly half-a-percentage point less.

The San Jose Unified School District also priced its general obligation refunding bonds that had been on our calendar. We didn’t follow-up yet on final yields. However, the double-A deal looked to be yielding roughly 1.10% in five years and 2.50% in 10 years.

Tax-exempt Rates Drop Even Lower; Slow Week for New Sales

(Aug. 12, 2011) -- Standard & Poor’s downgrade of the United States didn’t derail a continuing rally in fixed-income securities. Tax-exempt yields dropped again, down by almost a quarter-point by some measurements through mid-Thursday. U.S. Treasury securities were all over the place in recent days due to various factors, with yields lower than a week earlier. The Federal Reserve’s pledge to keep rates low for two more years helped support bonds, and U.S. Treasury prices were up strongly until selling on Thursday knocked them back. Some higher-grade general obligation measurements are down about one-half of a percentage point in the last two weeks. It’s hard to believe that tax-exempt yields would go much lower; if anything, a tick upwards is possible after this rally. Low supply of new municipal bond sales continues to be a factor supporting the rally.

The Los Angeles Department of Water and Power brought $307 million of water system revenue bonds at an opportune time, given the recent rally. The debt is refinancing older bonds. Moody’s Investors Service rates the bonds Aa2; Standard & Poor’s, AA, and Fitch Ratings, AA+. The shortest maturity, a six-year bond, yielded a tax-exempt 1.44%. The longest 30-year maturity came in at 4.30%. The 19-year bond was the first chance to get a 4% yield, and it was priced at par. A 10-year maturity yielded 2.56% and a 15-year, 3.60%.

The West Contra Costa Unified School District priced $86 million of general obligation refunding bonds. Moody’s Investors Service rates the district Aa3 and Standard & Poor’s, after a recent one-notch upgrade, A+. The bonds also carried a financial guarantee from Assured Guaranty Municipal. A five-year maturity yielded 1.97% and a 10-year, 3.45%. The longest maturity, in 13 years, yielded 4.11%.

Stunning Rally In U.S. Treasuries Pushes Tax-exempt Rates Lower

(Aug. 5, 2011) -- There was one overriding story in the fixed-income markets this week, and it had to do with a powerful rally in U.S. Treasury securities that dragged tax-exempt yields lower as well. The 10-year Treasury maturity dropped about one-half of a percentage point over the last week and the 30-year, about three-fifths of a percentage point. Municipal bonds followed in the footsteps. Because of the tax-exemption on these bonds, muni yields don’t move in exact lockstep with Treasuries. Still, they also staged a powerful rally. Various maturities dropped more than a quarter-point in the last week and a high-grade 30-year tax-exempt probably declined more than that, even as much as four-tenths of a percentage point using generic measurements.

While the federal agreement on raising the debt ceiling helped set the stage for the rally, a so-called flight to safety because of various market conditions pushed it into overdrive. Thursday’s stock decline, along with continuing concern over a European debt crunch, helped push Treasury yields even lower (meaning bond prices rose because fixed-income prices and yields move in opposite directions).

The impact of the rally didn’t necessarily show up in this week’s new-issue sales, either because they priced a bit before the biggest yield drop or because the types of securities didn’t benefit as much from the improvement. For example, this week’s sales mix included a double-B tax-exempt nonprofit health bond, lease-revenue bonds, and a Mello-Roos deal. These types of securities won’t rally as much as top-rated general obligation bonds.

A $77 million revenue bond refunding for the Sacramento Regional County Sanitation District priced this week. A financing authority issued the bonds, which carry Aa3, AA, and AA-minus (Fitch) ratings. There was a relatively narrow range of maturities; a bond due in 2022 yielded 3.20% and a 15-year, a tax-exempt 3.77%.

The Port of Oakland jumped into the market yesterday with a revenue bond refunding sale of almost $350 million. The bonds are rated A2 and A, plus an A+ from Fitch Ratings. We didn’t get all the final yields, though preliminarily the 10-year maturity looked to be in the neighborhood of 4.10% and the 20-year, 5.20%.

At the other end of the credit spectrum, the City of San Buenaventura (commonly known as Ventura) sold $350 million of revenue bonds on behalf of Community Memorial Health System. Moody’s Investors Service rates the bonds Ba2 and Standard & Poor’s, BB. Bond denominations were $100,000 instead of the typical $5,000 for higher-rated deals. You don’t see such big non-investment-grade new issues very often and you also don’t see such hefty tax-exempt yields very often. A five-year bond yielded a tax-exempt 5.11% and a 10-year, 6.62%. The 15-year maturity yielded 7.20%, the 20-year, 7.40%, and the 30-year, 7.65%. Do the taxable equivalent yield calculations on those and you’ll see investors are being compensated for taking on the added risk.

The Belmont-Redwood Shores School District sold various tax-exempt general obligation bonds with Aa2 and AA credit ratings. The $31 million tax-exempt Belmont Elementary Schools Facility Improvement District G.O. bonds yielded 2.90% in 10 years and 4.95% in 30 years. Big parts of the maturity schedule came as capital appreciation bonds.

The Coast Community College District priced more than $20 million of lease-revenue bonds (rated Aa3 and A+) through a financing authority this week. A five-year bond yielded a tax-exempt 2.51% and a 10-year, 4.15%. The 15-year maturity yielded 5.05%, the 20-year, 5.25%, and the 30-year, 5.62%.

The Davis Joint Unified School District priced $9 million of AA-minus G.O. bonds. A 15-year maturity yielded 3.40%.

In an unrated Mello-Roos bond sale example, the Jurupa Community Services District issued $7 million of CFD No. 38 (Eastvale Area) special tax bonds. Tax-exempt yields ranged from 3.00% in five years to 6.00% in 31 years. The 10-year bond yielded 4.60% and the 15-year, 5.30%, with the 20-year at 5.75%.

Irrigation Districts Led New-Issue Market; U.S. Debt the "Big" News

(July 29, 2011) -- The debate over raising the federal debt ceiling, and a looming August 2 deadline to do so, dominated fixed-income chatter this week. Tax-exempt bond yields didn’t change much and the August doldrums seemed to set in prematurely. We provided very few updates on other pages this week because of the “slow” activity. The rating agencies have warned that a downgrade of the United States triple-A credit rating could have implications for certain municipal issuers because of potential federal spending declines and other factors.

In the new-issue market, two irrigation districts took the spotlight. The Turlock Irrigation District sold $207 million of first priority subordinated lien revenue refunding bonds. Standard & Poor’s assigned a single-A rating to the issue and Moody’s, A2. Fitch Ratings grades the Turlock deal A+. A five-year bond yielded 1.74% and a 10-year, 3.42%. The 15-year maturity yielded 4.35% and the 20-year, 4.81%. A 30-year maturity yielded 5.12%.

The Imperial Irrigation District, which has been in the market a handful of times this year, returned with $76 million of electric system refunding revenue bonds. Moody’s rates the bonds A1 and S&P, AA-minus. A five-year bond yielded 1.76% and a 10-year, 3.38%. The 15-year maturity yielded 4.25% and the 20-year, 4.71%. A 30-year maturity yielded 5.15%.

San Diego County priced $33 million certificates of participation with Aa3 and AA+ credit ratings. The five-year maturity yielded a tax-exempt 1.87% and the seven-year, 2.73%. A 10-year COP yielded 3.58% and a 15-year, 4.39%. Going out 20 years returned 4.95% and a 31-year maturity yielded 5.33%. Going out 12 years almost got an investor 4% (actually 3.98%).

Capital appreciation bonds, sold at a deep discount to par, continue to be popular in some sales. The Mendocino-Lake Community College District priced $37.5 million of general obligation bonds and the majority of the deal included capital appreciation bonds. Sample reported yields included 4.93% in 10 years and 6.19% in 15 years. The bonds were insured by Assured Guaranty Municipal and also carry an “underlying“ A+ rating. A 30-year current interest bond in the college deal yielded 5.22%.

The Needles Unified School District sold $4 million of general obligation refunding bonds, with most of this deal also structured as capital appreciation bonds. The 10-year CAB yielded 5.08% and the 15-year, 6.39%. Shorter maturities were current-interest bonds and a four-year yielded 1.77%. Assured Guaranty Municipal insured the Needles school debt, which carried an underlying single-A rating based on the school district’s creditworthiness.

The Stanislaus Union School District sold G.O. bonds and most were structured as capital appreciation bonds. Assured Guaranty Municipal insured the deal. A current-interest bond due in 30 years yielded 5.22%. The Poway Unified School District School Facilities Improvement District No. 2007-1 also was pricing a general obligation bond deal with Aa2 and AA-minus ratings; we believe these also were capital appreciation bonds.

A Folsom financing authority sold Mello-Roos bonds for CFD No. 7. They are rated A-minus by S&P and also insured by Assured Guaranty Municipal. Sample yields included 3.05% in five years and 4.60% in 10 years.

The City of San Buenaventura (commonly known as Ventura) is selling $346 million of revenue bonds on behalf of Community Memorial Health System. As far as we know that deal wasn’t priced this week and now might sell next week. Moody’s Investors Service rates the bonds Ba2 and Standard & Poor’s, BB. Bond denominations will be $100,000 instead of the typical $5,000 for higher-rated deals.

Big Competitive Sales From State's Major Cities Topped Market

(July 22, 2011) -- Tax-exempt bond yields remained steady this week. If anything they dropped by a few basis points. The municipal market might be affected in coming days by the debate over the federal debt ceiling, though if a deal is reached this concern will fade away. New bond issuance in California was dominated for a change by competitively-bid sales and they will be our main focus in this summary.

As we noted earlier this week, the City of Los Angeles doesn’t have to shed any tears over a recent downgrade. Moody’s Investors Service recently lowered the city’s general obligation bonds to Aa3, putting them on the same level as other rating agencies at their AA-minus level. However, the city benefited from selling new bonds in an issuer’s market. On Tuesday Los Angeles sold $117 million of G.O. bonds. An investor would have had to go all the way out to a 2029 maturity to get a tax-exempt 4.04% on Tuesday’s sale. The 10-year maturity yielded 2.95%. The five-year yielded 1.34%, and the seven-year, 2.06%. The longest maturity in the deal, 20 years, yielded 4.23%.

On Thursday Los Angeles sold $260 million of G.O. refunding bonds. The five-year bond yielded 1.35% and the seven-year, 2.17%. A nine-year bond yielded 2.79%. A 12-year maturity yielded 3.31%.

The San Francisco Public Utilities Commission sold more than $700 million of water revenue bonds in a handful of series on Thursday. Moody’s Investors Service recently downgraded the commission’s water bonds by one notch, lowering them to Aa3 from Aa2. The downgrade affected the new sale and the commission’s existing water revenue bonds (totaling $3.7 billion if the new debt is included). As with Los Angeles, however, the San Francisco utility could thank an issuer’s market for relatively low yields. A five-year bond was pegged at 1.30%. A 10-year maturity in one of the series yielded 2.93%. A 15-year bond provided a 3.77% return. Yields rose above 4% on the 17-year maturities. A 20-year bond yielded 4.28% and a 30-year, 4.70%.

The Mountain View Shoreline Regional Park Community in Santa Clara Community priced $35 million of revenue bonds. They are rated single-A by Standard & Poor’s. The community was created in 1969 to develop 1,547 acres of bayfront land in the northeastern part of Mountain View. Revenue supporting the bonds comes from an allocation of tax revenue paid into a special fund of the community. The five-year bond yielded 3.03% and the 10-year, 4.60%. The 15-year bond yielded 5.32% and the 20-year, 5.60%.

There were a handful of other sales that we haven’t checked on for final yields. The Moreland School District priced $8 million of Aa3-rated G.O. refunding bonds. The maturities all fell within nine years. The five-year bond yielded somewhere in the neighborhood of 1.6%.

Tax-exempt Yields Drop as San Jose Airport Led New Issuance

(July 15, 2011) -- Tax-exempt bond yields dropped by a decent margin this week, driven by certain market conditions and declining U.S. Treasury rates. By some generic measurements municipal bond yields dropped one-tenth of a percentage point, though as usual that impact varied by maturity, credit rating, and type of security. Reinvestment of July payments from existing municipal bonds is getting some credit for decent investor demand in recent days. Despite rating warnings over the debt ceiling debate and the possibility of a downgrade on the triple-A United States grade, yields on U.S. Treasury bonds dropped sharply week.

This week’s biggest sale among fixed-rate bonds came from the City of San Jose, with $236 million of revenue debt for its airport. The A2 and A ratings meant investors would see juicier yields than some of the recent double-A offerings by general obligation issuers. A five-year maturity yielded 2.26%, a 10-year bond, 3.90% and a 15-year, 4.63%. A 20-year maturity yielded 5.05%. The majority of the sale is subject to the federal alternative minimum tax and, as a result, carried higher yields. The five-year AMT portion yielded 3.01% in five years and 4.60% in 10 years. A 15-year AMT maturity paid 5.33%.

In contrast, the double-A offering of $22 million general obligation bonds from the Glendale Unified School District featured the stingy yields typical for such deals in recent weeks. A five-year maturity yielded 1.39%. A 10-year bond yielded 2.96% and a 15-year, 3.93%.

A couple school districts brought new G.O. bonds with ratings in the single-A rating category. Both deals included bond insurance from Assured Guaranty Municipal. The single-A Fort Bragg Unified School District $9 million G.O. sale yielded 3.60% on a 10-year bond and 4.58% on a 15-year. Going out 30 years got you a 5.30% tax-exempt yield. The Garvey School District $5 million G.O. sale was rated A1 and A+ with AGM insurance to boot. A five-year bond yielded 1.95% and a 10-year, 3.56%.

The San Diego County Water Authority sold $87 million of subordinate lien bonds rated Aa3 and AA. All the sale was packed into a five-year maturity with a 1.48% yield. The Windsor Unified School District G.O. sale we mentioned in our weekly preview featured capital appreciation bonds.

Holiday-Shortened Week Saw a Few New Deals Price; Yields Up

(July 8, 2011) -- Tax-exempt bond yields rose again this week by a few basis points, at least on longer maturities. Some traders say the market is fighting a bout of indigestion as dealers find it harder to move inventory after yields plunged in recent weeks. It wouldn’t surprise us that some smaller retail investors are avoiding some of the more-aggressively priced municipal bonds. Holiday-shortened weeks aren’t always the best ones for monitoring market trends. Yields on U.S. Treasury bonds didn’t change much this week.

The Eastern Municipal Water District sold about $56 million of water and sewer refunding revenue bonds. This debt carries double-A ratings (and an AA+ from Fitch). The water district serves an area running from Moreno Valley south to Temecula and eastward to Hemet and San Jacinto. A five-year maturity yielded a tax-exempt 1.48% and the longest maturity in the sale (nine years) yielded 2.84%. A seven-year bond yielded 2.27%.

The San Mateo High School District priced $35 million of general obligation bonds with Aa1 and AA ratings. A four-year maturity yielded 1.14%. A 10-year bond yielded 3.06% and a 15-year, 3.97%. A 20-year maturity yielded 4.39%. The deal also included capital appreciation bonds.

A smaller G.O. sale by the Oxnard School District was rated Aa3 and A+. It included backing from Assured Guaranty Municipal. The five-year maturity yielded 1.90% and a 10-year, 3.45%. A 15-year bond yielded 4.66%.

The San Rafael City High School District priced G.O. bonds that are rated Aa2 and AA. A sample 10-year maturity from that sale yielded just a bit above 3%. As with a lot of deals nowadays, the “premium” bond structure is used to provide a bit of protection against rising rates. So the coupon on the 10-year maturity was 5% and the price was a bit above 116. The five-year maturity in the sale yielded in the neighborhood of 1.5%. The 15-year maturity was closer to 4.00%. The San Rafael City Elementary School District priced G.O. bonds rated a notch lower (Aa3 and AA-). A 10-year maturity in that sale yielded closer to 3.30%.

We also added the final yields from the institutional pricing for the San Diego Community College District sale of $372 million general obligation bonds. The deal appealed to a broad range of buyers thanks to a Moody’s Investors Service grade of Aa1 and a Standard & Poor’s rating of AA+, both of them one notch below triple-A. The bonds were split into various series. A five-year maturity yielded 1.46%. A 10-year bond yielded 3.11% and a 15-year, 4.06%. A 20-year maturity yielded 4.47% and a 30-year, 4.86%.

Tax-exempt Rates Rise; You Wouldn't Know It on Some New Deals

(July 1, 2011) -- You might not know it from some of the new-issue pricings, but tax-exempt bond yields did rise this week. In fact, using some generic measurements, yields on certain maturities probably rose by one-tenth of a full percentage point. Yields on U.S. Treasury bonds jumped even more, rising by as much as one-quarter of a percentage point. The safe haven allure of U.S. Treasuries amid concern over the Greek debt crisis also cut both ways; as some short-term concern over the situation in Greece dissipated, some investors moved back out of U.S. Treasuries.

As we have observed in recent weeks, it continues to be an issuer’s market for higher-rated deals. A handful of examples from this week’s new sales show why. A $131 million Los Angeles County Sanitation Districts Financing Authority revenue bond sale carried a Moody’s Investors Service grade of Aa1 and AA+ from Standard & Poor’s. A five-year maturity yielded a tax-exempt 1.37% and a 10-year, 2.91%. The high ratings, only one notch below triple-A, are driven by a requirement that participating districts make installment payments from a property tax allocation. That is why these are also called “senior ad valorem obligation bonds.” The sanitation district system provides sewage treatment and disposal to more than 5 million people in Los Angeles County.

The City of Saratoga sold $12 million of general obligation bonds with triple-A ratings. The five-year bond yielded a tax-exempt 1.37% and the 10-year, 2.80%. The 15-year bond yielded 3.60% and the 20-year, 4.00%. (So much for the days when investors with a “laddered” strategy could roll over money into a 10-year muni yielding 4.00%, at least given the current market for higher-grade securities.)

Ventura County’s community college district priced $50 million of G.O. bonds with double-A ratings. The yields weren’t much better: 1.45% in five years, 3.03% in 10 years, and 3.93% in 15 years.

There were some alternatives with higher yields. Santa Rosa high school and elementary school districts priced smaller G.O. issues with A+ ratings. Assured Guaranty Municipal provided financial guarantees. The five-year maturities yielded either 1.70% or 1.90% and the 10-year bonds came in closer to 3.40%. The 15-year bonds were around 4.30%. San Francisco Airport Commission revenue bonds with A1 and A+ ratings also provided some higher yields. Going out 20 years provided a tax-exempt return of 4.81%, while a shorter 11-year maturity yielded 3.79%. The commission’s sale also included tax-exempt bonds subject to the federal alternative minimum tax, and those yielded closer to roughly 5% in 14 years. S&P the other day upgraded its rating on the airport by one notch. “The raised rating reflects our opinion of management’s demonstrated efforts to control increases to the cost structure, attract new service, and manage future growth at the airport,” S&P said.

Puerto Rico sold general obligation bonds that are tax-exempt for California residents (both on a federal and state level). These bonds are rated in either the triple-B range or A3 from Moody’s, which has the commonwealth on a list for possible downgrade. The five-year maturity yielded 3.12% and an eight-year, 4.26%. A 20-year bond yielded 5.68% and a 30-year, 5.95%.

The Pittsburg Unified School District sold (through a finance authority) G.O. bonds with Aa3 and A ratings. Most of them were structured as capital appreciation bonds with sample yields of 5.42% in 10 years and 7.30% in 20 years. A current-interest bond due in 2046 (a 35-year maturity) yielded close to 5.60%.

Last week we said we would fill in yields on the San Bernardino Valley Municipal Water District certificates of participation sale with a top AAA rating from Standard & Poor’s. The bonds weren’t reoffered, and we forgot to get rate estimates. Earlier this week we plugged in those yields, which included 1.40% in five years, 3.00% in 10 years, and 4.20% in 20 years.

We Said to Buy Last Winter Amid "Panic"; Now You Can See Why

(June 24, 2011) -- As we observed elsewhere this week, it continues to be an issuer’s market for higher-rated deals. The example we cited was this week’s $47 million bond pricing by the Contra Costa Water District. A five-year water revenue bond (rated Aa2 and AA+) yielded 1.40% and a 10-year, 2.90%. The 14-year maturity yielded 3.62%. We concluded that sensitive investors (and insensitive investors and hardened bond traders as well) are shedding some tears over these paltry yields. Well, we told you the time to be buying was last winter, amid another false panic over municipal bonds. In the broader market this week, tax-exempt yields generally were steady if not a bit lower.

The San Marcos Unified School District’s $145 million offering of general obligation bonds carried Aa2 and AA- ratings from Moody’s Investors Service and Standard & Poor’s, respectively. A good chunk of the deal was structured as capital appreciation bonds. Tax-exempt yields on the current-interest bonds included 3.08% in 10 years and 4.78% in 20 years. A bond due in 2038 yielded 5.10%.

The Chino Valley Unified School District sold $34 million of G.O. bonds with a split rating (Aa2 and A+). The five-year bond yielded 1.55%, the 10-year, 3.18%, and the 15-year, 4.14%. San Ramon certificates of participation with an AA+ rating yielded 1.77% in five years and 3.33% in 10 years.

The Los Angeles Harbor Department also was in the market this week with higher-rated revenue bonds (Aa2 and AA). The Los Angeles Port is the busiest in the nation based on certain measurements, including container traffic and revenue per ton. In this day and age of worldwide trade, the port provides an essential service to the economy. However, the deal had to include higher yields on a portion of the tax-exempt bonds because they are subject to the federal alternative minimum tax. A five-year maturity subject to the AMT yielded 2.20% and a 10-year, 3.78%. In contrast, a part of the deal that wasn’t subject to the AMT only had to yield 3.30% on a bond due in 2022. A bond subject to the AMT and due in 2022 had to pay 3.96%. A 14-year Harbor Department bond that wasn’t subject to the AMT yielded 3.77%.

Grass Valley’s smaller double-A sale of wastewater revenue bonds yielded a tax-exempt 1.62% in five years and 3.08% in 10 years. Remember the California Infrastructure Bank deal we discussed for The Broad museum collection in Los Angeles? That $150 million sale was packed into a 10-year maturity and yielded a tax-exempt 3.13%.

Investors could pick up a little yield on a small Denair Unified School District general obligation bond sale. The A+ bonds were insured by Assured Guaranty Municipal and yielded 2.50% in five years, 3.98% in 10 years, and 4.69% in 15 years. Denair is located southeast of Modesto.

The San Bernardino Valley Municipal Water District sold about $9 million certificates of participation with a top AAA rating from Standard & Poor’s. We haven’t filled in the yields on this deal yet in the table below because the bonds weren’t reoffered, and we forgot to get rate estimates. We’ll do so soon and plug in some numbers.

Los Angeles Power and Pomona School Bonds Show Yield Trends

(June 17, 2011) -- A $694 million power system bond sale by the Los Angeles Department of Water and Power was the deal in the spotlight this week, especially in a year when $100 million-plus offerings are rare. Tax-exempt rates didn’t change much this week and certain indices remain at the lowest level since early November 2010. U.S. Treasury yields did drop this week and also are at the lowest levels since November.

Moody’s Investors Service rates the Los Angeles power system bonds Aa3; Standard & Poor’s and Fitch Ratings, AA-minus. Investors were offered coupons of either 2% or 5% on a three-year maturity and they were priced to yield a tax-exempt 0.90%. The five-year bonds with 2% or 4% coupons were priced to yield 1.49%. A seven-year maturity with 3% or 5% coupons was priced to yield 2.36%. The 10-year bond with either 4.50% or 5% coupons yielded 3.09%. The longest maturity in the sale, 11 years, yielded 3.26%. Proceeds from the new sale refunded certain outstanding 2001A power system revenue bonds and certain 2003B power system revenue bonds. Los Angeles DWP is the largest municipal utility in the United States.

We have been making the point for some time that investors have to venture into single-A territory to find added income-generating opportunities. The Los Angeles utility example above is a good measurement of how much tax-exempt rates have fallen for higher-rated sales, especially those for an “essential purpose.” In contrast, the Pomona Unified School District this week sold $46 million of general obligation bonds with a single-A rating. The five-year maturity yielded 2.50% and the 10-year, 4.00%. Those yields are roughly a full percentage point higher than what the L.A. DWP deal paid. Pomona school’s 15-year bond yielded 4.90% and the 20-year, 5.25%.

The Greenfield Union School District sold a tiny issue of certificates of participation this week with an “underlying” rating of A-minus. The deal carried a guarantee from Assured Guaranty Municipal. The five-year bond yielded 3.25% and the 10-year, 4.62%. The 20-year maturity yielded 5.70% and the 30-year, 5.97%.

A City of Livermore certificate of participation sale came under the heading of not reoffered. A 10-year COP yielded 3.60% and an 18-year maturity, an even 5.00%. There were a handful of other bonds priced this week, including some structured as capital appreciation securities. A 20-year maturity on a Brea Redevelopment Agency new tax allocation bond yielded a tax-exempt 5.33%.

Tax-exempt Bond Sales Surge For a Change, Based on 2011 Levels

(June 10, 2011) -- Sales of new municipal bonds in California surged this week, at least in comparison with some of the slower weeks in 2011. Issuers are taking advantage of a springtime rally that pushed tax-exempt rates to the lowest levels since last November (at least on higher-quality bonds). Yields didn’t change much this week after rising a couple days, then falling back. (We have published a short update on other pricings that occurred at the end of the week, after this summary was prepared. You can see it here under the June 11 entry.)

Our spotlight this week falls on the Carlsbad Unified School District. It sold $53 million of general obligation bonds with an Aa2 rating from Moody’s Investors Service and an AA grade from Standard & Poor’s. This is a good “benchmark” deal to measure current yields available on a solid double-A offering. The five-year maturity yielded a tax-exempt 1.47% and the 10-year bond, 2.93%. Sorry, that isn’t a typographical error. The 10-year maturity didn’t even reach 3%. And how about the 15-year maturity? The yield was 3.99%. Come on, throw us a bone! Throw in an extra basis point and give the poor investor 4.00%. That’s just rubbing their faces in the reality of an issuer’s market. Ha!

Of course, it could have been worse, and it was if you purchased water revenue bonds sold by the Metropolitan Water District of Southern California. This $170 million deal is rated Aa1 by Moody’s, AAA by S&P, and AA+ by Fitch Ratings. The bonds were packed into a few early maturities. The five-year bond yielded a tax-exempt 1.20% and the nine-year, 2.46%. The water district, even after a one-notch downgrade by Fitch, remains a premiere example of an “essential-service” provider. Southern Californians need water and the district is a key player in that equation. Bondholders are getting safety when they buy the district’s debt; in this environment, however, they aren’t getting much yield.

The Imperial Irrigation District priced $75 million electric system revenue bonds this week. They are rated A1 (Moody’s), AA-minus (S&P), and A+ (Fitch). The five-year maturity yielded 1.96% and the 10-year, 3.50%. The 15-year maturity yielded 4.26% and the 20-year, 4.71%. Buyers going out 30 years received a 5.06% yield. This is another example of an essential-service provider, just one that is rated a bit lower. From the standpoint of actual default risk, Imperial Irrigation isn’t much different from the Carlsbad school and Metropolitan Water examples above. It does pay up with higher yields, however, because its financial cushions aren’t the same as M.W.D. and a revenue bond isn’t the same security as a general obligation. We still think it’s an alternative for even a “conservative” investor.

A few other bonds priced this week. Certain school district G.O. deals with Aa3 ratings from Moody’s priced around 1.60% tax-exempt yields in five years, a little above 3.00% in 10 years, and about 4.25% in 15 years. The Santa Clara Unified School District yesterday priced G.O. bonds. Many maturities were not reoffered and we didn’t get a chance yet to check the yields for purposes of more example. S&P rates the debt AA with a “negative” outlook. The San Mateo Union High School District priced $90 million of highly-rated general obligation bonds (Aa1 and AA). However, these were structured as capital appreciation bonds that don’t pay “current” interest on a semiannual basis. The yields were 2.53% in five years, 4.62% in 10 years, and 6.21% in 15 years.

Tax-exempt Rates Steady Again; TRANs Dominate New Issues

(June 3, 2011) -- Tax-exempt rates were a bit lower this week. Certain municipal bond indices for yield estimates remain at the lowest levels since last November after a powerful rally this spring. The new-issue market for long-term bond sales was somewhat slow this week and a couple smaller sales we thought might price are coming next week instead. The biggest sales in the market are in the short-term side. Tax and revenue anticipation note sales, used by governments to manage cash-flow needs, tend to peak around this time of year.

The Southwestern Community College District priced $70 million of general obligation bonds that are rated Aa2 by Moody’s Investors Service and AA-minus by Standard & Poor’s. The Chula Vista-based college district has just celebrated its 50^th anniversary. We didn’t follow up and pinpoint the final exact yields but believe the following rates are “in the neighborhood” of where the deal priced. A five-year bond yielded around a tax-exempt 1.75% and a 10-year maturity, 3.20%. The 15-year bond yielded around 4.30% and the longest maturity in the deal (2040), roughly 5.15%. We will plug in exact yields when we check the final scale. Those yield levels are consistent with other recent double-A sales, including the Palm Springs Unified School District deal in late May.

The Sonora Elementary School District priced $3 million of general obligation bonds. This deal is rated A-plus by Standard & Poor’s and also included a financial guarantee from Assured Guaranty Municipal. A five-year bond yielded a tax-exempt 2.68% and a 10-year maturity, 4.15%. The 30-year bond yielded 5.60%.

The Alvord Unified School District priced $57 million of G.O. bonds that carry an A1 rating from Moody’s Investors Service and A+ from Standard & Poor’s. This deal also was insured by AGMuni. Capital appreciation bonds and convertible capital appreciation bonds were used instead of current-interest bonds. A convertible CAB yielded 4.41% in 10 years; a (non-convertible) CAB due in 11 years, 5.68%.

The Inland Development Agency priced $162 million of 30-year tax allocation bonds we mentioned previously. However, the single-A deal includes mandatory tender dates in 2014, 2015, or 2016. The yield was 3.68% on the 2016 tender-date bonds.

Tax and revenue anticipation notes are the biggest deals, dollar-wise, right now. They also offer puny yields. Issuers, whose tax receipts often come in bunches at certain times of year, sell these notes to cover monthly expenses that stay steady. Orange County’s TRANs due on June 29, 2012, yielded 0.27%. San Bernardino County notes, with the same maturity, 0.28%. After doing the taxable equivalent yield we suppose you can argue the return is better than stuffing money in your mattress.