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Ohio's Tobacco Bonds Gain in First Day, Bolstering Muni Market 

Bonds from Ohio's record $5.5 billion Buckeye Tobacco Settlement Financing Authority offering advanced in their first day of trading, helping give a lift to the broader market for state and local government debt.

The yield premium on the largest batch of the Ohio bonds -- a $1.4 billion tax-exempt issue with a 40-year maturity and a 5.875 percent interest rate -- narrowed to 153 basis points from 161 basis points at pricing, relative to top-rated 30-year municipal bonds. Demand at yesterday's sale allowed underwriters Bear Stearns Cos. and Citigroup Inc. to lower yields on the bonds by 3 basis points from an initial 6.10 percent.

Ohio's deal was the largest to raise a lump sum by selling off future payments from the 1998 settlement between states and cigarette makers and the biggest tax-exempt bond offering since 2004. The appetite shown for the bonds, while bolstering the municipal market, also helped stoke gains in tobacco debt sold by other state and local governments.

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