Massachusetts Sells $525 Million in GO Bonds: Muni Deals

Massachusetts plans to sell $525 million of general-obligation bonds for a capital plan that includes an extension of Boston’s Green Line train and an overhaul of the city’s South Station rail hub.

Proceeds will go toward Democratic Governor Deval Patrick’s five-year, $11 billion spending plan introduced this month. The state is rated one level below the top grade by Moody’s Investors Service and Standard & Poor’s.

“It’s a pretty straightforward general-obligation deal,” Treasurer Steven Grossman said in a telephone interview. “The economic prospects for the commonwealth are pretty solid.”

The state is gaining strength after the 18-month recession that ended in 2009, with tax receipts for the first five months of the fiscal year up 9.7 percent over the same period last year, according to the Department of Revenue.

Moody’s said its rating in part reflects the commonwealth’s “strong financial management practices and its demonstrated willingness to balance its budget when necessary through spending cuts, revenue increases and use of reserves.”

Transportation projects account for more than a third of the five-year plan, including $117 million for extending the Green Line into the northwest suburbs. A $20 million chunk will go toward work on Boston’s South Station rail hub. Higher education and community investments -- such as expanding broadband networks -- also make up a third of the five-year program.

Narrower Spread

Investors demand about 0.04 percentage point of extra yield to buy 10-year Massachusetts debt instead of benchmark munis, down from a difference of close to 0.4 percentage point in January, data compiled by Bloomberg show.

Bonds of Massachusetts and its local issuers have lost 2.3 percent this year, compared with a decline of about 2.5 percent for the entire municipal market, Standard & Poor’s data show.

The securities are scheduled to sell tomorrow via auction, Bloomberg data show. The largest portion matures in 30 years.

In a general-obligation sale in July, bonds due in August 2043 priced to yield 4.7 percent, or about 0.16 percentage point above benchmark debt. Those bonds traded last week at an average yield of 4.34 percent.

The commonwealth’s deal is the week’s biggest general-obligation sale. It joins issuers nationwide selling about $3 billion of debt this week, the least for a non-holiday week in about a year.

To contact the reporter on this story: Annie Linskey in Boston at alinskey@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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