Summer Slowdown Deepens as D.C. Leads With $327 Million

The summer doldrums will take hold of the municipal market this week as new-issue volume dips to $3.96 billion from $5.21 billion last week, according to Thomson Reuters, and a $326.9 million District of Columbia general obligation offering takes the lead as the largest deal on the negotiated calendar.

By comparison, last week, the market kicked off August with an $800 million New York City GO offering and a $717.8 million Bay Area Toll Authority revenue sale.

The city deal had a final maturity in 2029 with a 4.87% coupon priced to yield a 5.03% - 10 basis points cheaper than the generic, Municipal Market Data triple-A-rated GO scale in 2029 which yielded 4.93% at the time. The BATA deal, meanwhile, had a 2047 final maturity with a 5.12% coupon priced to yield 5.33%.

This week's District of Columbia's Series 2008E bonds are expected to be priced by Merrill, Lynch & Co. tomorrow with a structure that includes bonds maturing from 2009 to 2033. The bonds are expected to be rated A1 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.

The deal represents the second half of the city's planned fiscal 2008 GO issuance, and will finance various capital projects.

The district will also sell $151.4 million of Series 2008 F GO refunding bonds on Wednesday in a separate negotiated deal being priced by Siebert, Brandford, Shank & Co. The current refunding, whose structure includes bonds maturing from 2009 to 2025, is interest-rate sensitive and will retire bonds originally issued in 1998.

Elsewhere in the Northeast, a pair of deals from New York issuers is expected to arrive, beginning with $271.9 million of revenue and refunding bonds tomorrow from the New York City Health and Hospitals Corp.

The bonds, which will be priced by Morgan Stanley, are expected to be rated A1 by Moody's, A-plus by Standard & Poor's, and A by Fitch. According to the preliminary official statement, the deal consists of two term bonds, but the exact maturities were not listed in the document and a person familiar with the deal at Morgan Stanley declined to give specifics.

Secured by health care reimbursements and other funds and accounts received by the HHC, including investment income, the proceeds of the deal will finance various capital projects and will retire bonds in Series 2002 B through H.

The hospital deal will be followed by a $208.1 million refunding from the New York Local Government Assistance Corp., slated to be priced in the competitive market on Wednesday.

The Series 2008C refunding of senior-lien bonds is expected to mature from 2009 to 2018, though the ratings for the deal were not available at press time on Friday. The bonds are secured by a first lien on revenues, monies, and securities in the senior debt service reserve fund and the senior capital reserve fund.

The California Housing Finance Agency, meanwhile, will issue $250 million of home mortgage revenue bonds in a two-pronged deal being priced by Merrill tomorrow after a retail order period scheduled for today.

Series 2008L will consist of bonds not subject to the alternative minimum tax and maturing from 2009 to 2038, while Series 2008M, which is subject to the AMT, will mature in 2023 and 2025.

The California housing bonds are expected to be rated Aa2 by Moody's and AA-minus by Standard & Poor's.

The only two other relatively sizable deals in the market this week include a $200 million capital improvement GO offering from North Carolina, and a $200 million Kansas Department of Transportation highway revenue offering.

The North Carolina GO sale will take place on Wednesday in the competitive market and is structured to mature from 2010 to 2028. The bonds are expected to be rated Aa1 by Moody's and AA-plus by Standard & Poor's and Fitch.

Merrill is expected to price the Series 2004B Kansas highway bonds on Wednesday. The deal, whose maturity structure was not available by press time Friday, is a conversion of auction-rate securities to fixed rate. The deal has natural triple-A ratings from Standard & Poor's and Fitch.

Outside the long-term market, the only somewhat sizable deal is a $210 million Milwaukee revenue anticipation note sale expected to be priced tomorrow in the competitive market.

The school notes will mature in 2009 and are expected to have ratings of MIG1 from Moody's, SP1-plus from Standard & Poor's, and F1-plus from Fitch.

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