A $1.2 billion offering of New York City variable-rate demand bonds and $617 million of debt for the New Jersey Economic Development Authority lead the way in the primary market this week.
The deals head up a slate of $7.3 billion, up from the $5.4 billion of bonds that were priced in the new-issue market last week.
"It's not a great environment for new issuance," said Matt Fabian, managing director at Municipal Market Advisors.
"There's no good buyer of supply in the market. There's no good bidder. The long end is particularly weak," he wrote. "The other thing is that, with a lot of the expected issue surge over the next few months coming from auction-rate securities restructurings, ARS issuers are, in general, riskier profile issuers. There are a lot of big solid names in there, but there's also a disproportionate amount of riskier-sector issuers in the ARS world. So that could pressure credit spreads wider."
"If you're a buyer in this environment," he added, "you would want to be focusing more on high-grades as far as near-term return."
In the week's largest scheduled transaction, Merrill Lynch & Co. today will price $1.2 billion of variable-rate demand bonds for New York City. The credit is rated Aa3 by Moody's Investors Service, AA by Standard & Poor's, and AA-minus by Fitch Ratings.
This comes on the heels of the city pricing $369 million of general obligation debt earlier this month. Merrill also priced that transaction, in two series. Bonds from the larger $357 million series mature from 2.45% with a 4% coupon in 2009 to 4.19% with a 4% coupon in 2018. Bonds from the smaller $12 million series mature from 2008 through 2018, with yields ranging from 2.25% in 2008 to 4.19%, all with 4% coupons.
Among all paper in the deal, bonds maturing from 2010 through 2012 were widest to that day's Municipal Market Data triple-A yield curve, with yields 49 basis points over the curve. Bonds maturing in 2009 were tightest to the scale, with yields 45 basis points over.
Morgan Stanley Wednesday will price $617 million of school facilities construction bonds for the New Jersey EDA. The deal will convert auction-rate securities to fixed-rate bonds with puts.
The authority last sold school facilities construction bonds in Sept. 2007. Bear, Stearns & Co. priced that $300 million transaction, with bonds maturing from 2009 through 2027, with term bonds in 2032 and 2037. Yields range from 3.48% with a 4% coupon in 2009 to 4.64% with a 5% coupon in 2037. Bonds maturing from 2009 through 2032 are insured by Financial Security Assurance Inc. Some bonds maturing in 2037 are insured by Ambac Assurance Corp. Another set of bonds maturing in 2037 came uninsured.
Among 5% coupon paper in the deal, bonds maturing in 2032 were widest to that day's MMD triple-A yield curve, with yields 18 basis points over the curve. Bonds maturing in 2037 were tightest to the scale, with yields seven basis points over.
Leading the competitive slate, Portland, Ore., Thursday will sell $554.1 million of sewer system revenue and refunding bonds in two series. The larger series, worth $339.9 million of first-lien bonds, will mature from 2009 through 2033. The smaller series, worth $214.2 million of second-lien bonds, will also mature from 2009 through 2033. The first-lien bonds are rated Aa3 by Moody's and AA-minus by Standard & Poor's. The second-lien bonds are rated A1 by Moody's and AA-minus by Standard & Poor's.
Portland last sold sewer system revenue refunding bonds in Feb. 2007. Citi won that $205 million deal of first-lien bonds with a true interest cost of 3.72%. The bonds mature from 2007 through 2015, yielding 3.60% in 2011 and 3.62% in 2012, both with 5% coupons. The remainder of the debt was not formally re-offered. Bonds maturing from 2011 through 2015 are insured by MBIA Insurance Corp.
Bonds maturing in 2012 were widest to that day's MMD triple-A yield curve, with yields eight basis points over the curve. Bonds maturing in 2011 were tightest to the scale, with yields six basis points over.
UBS Securities LLC Wednesday will price $553.7 million of second-lien water revenue project and refunding bonds for Chicago. The bonds will mature from 2009 through 2028, with term bonds in 2033 and 2038. The bonds will be insured, and the underlying credit is rated A1 by Moody's, AA-minus by Standard & Poor's, and AA by Fitch.
Chicago was last in the new-issue market in January. Lehman Brothers priced that $780 million offering of general airport third-lien revenue bonds, to benefit O'Hare International Airport.
The bonds were priced in four series. Bonds from the $530.2 million Series A mature from 2019 through 2028, with term bonds in 2033, 2034, and 2038. Yields range from 3.77% with a 5% coupon in 2019 to 4.64% with a 4.5% coupon in 2038. Bonds from the $175.5 million Series B mature from 2018 through 2020, yielding 3.67%, 3.77%, and 3.84%, respectively, all with 5% coupons. Bonds from the $45.1 million Series C mature from 2010 through 2023, with term bonds in 2028, 2033, and 2038.
Yields range from 2.77% with a 4% coupon in 2010 to 4.64% with a 4.5% coupon in 2038. Bonds from the $29.1 million Series D mature in 2018, 2023, 2038, and 2038, with yields ranging from 4.07% with a 4% coupon in 2018 to 4.77% with a 4.6% coupon in 2038. All the bonds are insured by FSA.
Among 5% coupon paper in the deal, all bonds were priced to yield 32 basis points over that day's MMD triple-A yield curve.
