Along With Big Note Deals, $6.86B of Bonds Loom

The municipal market is expected to see a mixed bag of state general obligation and revenue financings this week, including two taxable Build America Bond issues for transportation projects, as an estimated $6.86 billion of new long-term volume is slated for pricing amid strong demand, according to Ipreo LLC and The Bond Buyer.

The projected volume is a slight improvement from the revised $5.68 billion that was priced last week and $3.16 billion that priced the week of Aug. 2, according to Thomson Reuters.

This week’s note market, by comparison, will be dominated by a $2.25 billion sale of New Jersey tax and revenue anticipation notes planned for competitive pricing on Thursday.

In addition, Massachusetts will issue a three-pronged GO revenue anticipation note deal consisting of two series of $425 million each and one $350 million series. Note deals are not included in the weekly volume.

The long-term activity will kick off in the Northeast where on Wednesday Massachusetts will issue an additional $358 million of GO bonds and the Pennsylvania Turnpike Commission is expected to sell $600 million of toll road revenue debt for infrastructure needs.

The turnpike deal will be priced by Bank of America Merrill Lynch. According to commission officials, the entire offering is likely to be issued as taxable BABs, but there is a possibility some tax-exempt bonds could be inclueded depending on market conditions.

Since the infrastructure projects are extremely long-term, and the commission has the ability to issue 40-year bonds, the BAB portion could mature out to 2050 — much longer than its 2009 BABs that matured in 2037 and 2039, officials said.

Proceeds will help finance upgrades within the turnpike’s 10-year capital plan, according to the preliminary official statement.

With supply on the weak side lately, new deals price attractively compared to the generic scale have been getting snapped up by investors seeking tax-free income.

Demand has helped drive yields to record lows. The Municipal Market Data triple-A scale yielded a record-low 2.43% in 10 years and 3.53% in 20 years on Thursday. The scale yielded 3.87% in 30 years on Thursday.

Last week a $696.1 million junior-lien airport revenue sale from the Phoenix Civic Improvement Corp. priced by Barclays Capital benefited from the market conditions.

The final 2040 maturity in the $642.6 million tax-exempt series was priced to yield 5% at par. That was 109 basis points higher than the generic triple-A GO due in 2040 that ended at a 3.91% yield at the time of the pricing onTuesday, according to MMD.

Secured by revenue collected at the city’s airport, most of the proceeds of the Phoenix deal will finance the PHX Sky Train, designed to connect the airport terminals with a light-rail station, parking lot, and car rental outlet.

This week in the Southeast, North Carolina will competitively sell $494.6 million of GO refunding bonds on Tuesday. The bonds have natural triple-A ratings from all three major rating agencies, and the deal is structured to mature from 2011 to 2019. In addition, the Kentucky Asset Liability Commission will sell $468.1 million of traditional taxable bonds in a negotiated deal planned for pricing by JPMorgan on Wednesday after the firm takes indications of interest on Tuesday.

Although the structure was still being discussed at press time Friday, the Kentucky bonds are rated Aa2 by Moody’s Investors Service, A-plus by Standard & Poor’s, and AA-minus by Fitch Ratings.

Louisiana will add to the region’s supply when it issues $405.3 million of gasoline and fuel tax second-lien revenue bonds. Goldman, Sachs & Co. expects to price the issue Wednesday after first offering the bonds to retail investors on Tuesday. The bonds are rated Aa2 by Moody’s and AA by Standard & Poor’s.

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