Volume will be noticeably lighter and smaller-sized offerings will take the spotlight this week in lieu of the meatier deals that have dominated primary activity recently.
Underwriters are expected to price an estimated $3.64 billion in new supply, according to Ipreo LLC and The Bond Buyer.
That amount is nearly half of last week’s revised $6.29 billion, according to Thomson Reuters. The lack of supply so close to the spring reinvestment season has some scratching their heads.
“Everyone needs money and states are not running surpluses, so that tells us the pipeline is building and we just haven’t seen it yet,” said Jay Alpert, executive vice president and manager of trading and underwriting at M.R. Beal & Co. in New York. “It might manifest itself in the second or third quarter.”
He said the muni market is much more efficient when volume is closer to the typical $8 billion to $10 billion a week at this time of the year. “The heavier the supply, the more rotation of bonds and the more price discovery you have, and the system tends to be more efficient,” he said.
The largest deal this week is a $421.7 million competitive general obligation refunding planned by Wake County, N.C.
The bonds have triple-A ratings from Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings and are structured as serial bonds maturing from 2013 to 2026. They are expected to be sold on Wednesday.
Elsewhere in the Southeast, the Municipal Electric Authority of Georgia will issue $130 million of combined cycle project revenue bonds in a negotiated deal to be led by JPMorgan tomorrow.
The bonds are rated A1 by Moody’s, A by Standard & Poor’s, and A-plus by Fitch and are tentatively structured to mature serially from 2010 to 2029.
The Virginia Public School Authority will add to the Southeast supply when it issues $113.2 million of school financing bonds in a JPMorgan-led offering. They are rated Aa1 by Moody’s, and AA-plus by Standard & Poor’s and Fitch.
The deal will include $66.4 million of federally taxable bonds maturing from 2021 to 2030 and $46.8 million of tax-exempt bonds structured to mature from 2011 to 2030.
Meanwhile, a handful of deals — led by a $253 million revenue sale from the Massachusetts Water Resources Authority — are on tap in the Northeast.
The water deal is earmarked for pricing by Citi tomorrow and is comprised of $100 million of new-money general revenue bonds and $153 million of refunding bonds. Both series are structured to mature from 2015 to 2030 and term in 2035 and 2040. They are rated Aa2 by Moody’s, AA-plus by Standard & Poor’s, and AA by Fitch.
Meanwhile, issuers in Connecticut, New Jersey, and New York will deliver a trio of higher education offerings, the largest of which is a $189.1 million revenue sale from the Connecticut Health and Educational Facilities Authority on behalf of Wesleyan University.
Rated Aa3 by Moody’s and AA-minus by Standard & Poor’s, the deal is expected to be priced by Goldman, Sachs & Co. tomorrow with a structure that includes serial bonds maturing from 2023 to 2030 with term bonds planned in 2035 and 2039.
The New Jersey Higher Educational Assistance Authority will offer a $145 million issue to convert auction-rate debt to tax-exempt. The triple-A rated deal is expected to be priced by Bank of America Merrill Lynch on Thursday.
In another Goldman-led deal, the Dormitory Authority of the State of New York will sell $127.7 million of revenue bonds on behalf of Cornell University.
Series A consists of $64 million of serial bonds maturing from 2011 to 2028, while Series B consists of $63 million of serial bonds due in 2029 and 2030, with term bonds in 2035 and 2037.
The issue, rated Aa1 by Moody’s and AA by Standard & Poor’s, is planned for pricing on Thursday following a retail order period on Wednesday.
Veering to the Southwest, the Lower Colorado River Authority in Texas will issue $200 million of transmission contract refunding and improvement revenue bonds in a deal being senior-managed by Morgan Stanley. The bonds are slated for pricing on Thursday. They are expected to carry ratings of A2 from Moody’s, A from Standard & Poor’s, and A-plus from Fitch. The structure was not available at press time.
Last week, the largest deal to be priced was $723 million of school facilities construction bonds for the New Jersey Economic Development Authority by Bank of America Merrill.
Bonds ranged in yield from 2.77% in 2015 to 4.56% in 2031 — 67 basis points higher in yield than the generic triple-A GO scale in 2031 at the time of the pricing last Wednesday, according to Municipal Market Data.
The bonds are callable at par in 2020 and are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.
Two weeks ago, the market welcomed a $1.04 billion offering of airport revenue bonds from Chicago for O’Hare International Airport. The deal’s $461.9 million tax-exempt series featured non-AMT bonds due in 2040 that were priced on April 15 to yield 5.10% — 95 basis points higher than the generic triple-A scale at the time, according to MMD. The bonds are rated A1 by Moody’s, A-minus by Standard & Poor’s, and A by Fitch.
