The Week Ahead

Weekly Calendar Bulks Up

The first full week of the fourth quarter gets underway with $13.13 billion of new, long-term volume, which is expected to continue to re-energize a thin and sleepy primary market, according to Ipreo LLC and The Bond Buyer.

The noticeably larger calendar — which includes at least four long-term deals of $1 billion or more — dwarfs the revised $9.85 billion that came to market last week, according to Thomson Reuters.

An additional $1 billion sale of tax and revenue anticipation notes from Pennsylvania is planned for pricing in the short-term competitive market on Tuesday.

The unusually large injection of weekly volume comes on the heels of September’s $31 billion tally, which was 3.6% more than the same month a year ago. It follows a sleepy August in which volume fell by a fifth despite record-low yields, according to Thomson Reuters data.

“Clearly the sense of urgency is on the side of the issuers as opposed to the buyers,” said a New York underwriter. “Anytime the municipal market gets hit with such big supply all at the same time, it becomes self-evident that spreads widen, prices go down and yields go up.”

The billion-dollar blitz kicks off with a $1.9 billion sale of revenue debt by the California Department of Water Resources, which is scheduled for negotiated pricing by senior manager Bank of America-Merrill Lynch. The bonds will go to retail Wednesday and be priced on Thursday. They are rated Aa3 by Moody’s Investors Service, AA-minus by Standard & Poor’s, and AA by Fitch Ratings, and are structured to mature serially from 2011 to 2019.

The Northeast region is expected to contribute nearly $4 billion to the brisk pace of new-issue activity from three large and highly recognizable issuers.

The New York State Dormitory Authority is gearing up to bring $1.36 billion of personal income tax revenue debt to market in a four-pronged deal being led by M.R. Beal & Co. that is pricing Tuesday. Series 2010E and F are both tax-exempt securities that were offered to retail investors beginning last Thursday and Friday during a two-day retail order period ahead of Monday’s institutional orders.

Series 2010G and H are both taxable and planned for pricing on Tuesday — but only Series H is designated as Build America Bonds.

New York City, meanwhile, is on tap to sell two general obligation bond issues, one in the negotiated market and one in the competitive market. The larger negotiated issue totals $1.1 billion and consists of $650 million of taxable GO debt issued as BABs, as well as $500 million of tax-exempt GO debt. They are slated for pricing Thursday by Bank of America-Merrill and rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch.

The city will also sell $150 million of taxable GO debt in the competitive market Thursday, structured as serial bonds maturing from 2012 to 2019.

Pennsylvania is expected to contribute to the bond bonanza Tuesday with the sale of $1 billion of tax anticipation notes, followed Wednesday by $386.5 million of GO refunding bonds — both in the competitive market. The notes are being issued to provide cash flow to the commonwealth’s general fund.

The refunding series is structured to mature from 2011 to 2023 and is being used to reduce debt-service payments on outstanding bonds from Second Series 2003, First and Second Series 2004, and First Series A 2007, which were issued at higher interest rates.

Connecticut rounds out the Northeast regional activity with a $520 million sale of taxable, direct-pay bonds included in last year’s American Recovery and Reinvestment Act. Series B consists of qualified school construction bonds, Series C is recovery zone economic development bonds, and Series D consists of BABs.

The transaction is being senior-managed and priced by Morgan Stanley, and is rated double-A by all three major rating agencies. The maturity structure and other details were still being finalized Friday at press time.

In the Midwest, Illinois’ Metropolitan Pier and Exposition Authority is planning to price a $1.2 billion financing on behalf of the McCormick Place convention center project. The agency is a municipal corporation created by the Illinois General Assembly that owns and manages the McCormick Place complex, a Chicago-based venue that hosts conventions, fairs, trade shows, and expositions to strengthen the city’s local economy.

The deal, which is being senior-managed and priced by Morgan Stanley, consists of three series of 2010 bonds. Series A is comprised of tax-exempt new-money bonds, Series B is tax-exempt refunding bonds, and Series C is taxable refunding bonds. The maturity structure and other details were not available at press time.

In other new-issue activity, the competitive market will see the arrival of nearly $1 billion of Georgia GO debt, and $375.1 million of Louisiana GO refunding bonds on Tuesday.

The Georgia transaction carries three triple-A ratings. It totals $974.9 million and consists of five series of bonds. The largest is $360.4 million of taxable, direct-pay BABs maturing from 2011 to 2030, followed by $321 million of GO tax-exempt refunding bonds structured to mature from 2012 to 2022.

Another $170.1 million will consist of tax-exempt GOs maturing from 2011 to 2020, while $94.6 million will include taxable, direct-pay recovery zone economic development bonds. The final series consists of $28.7 million of taxable, direct-pay qualified school construction bonds slated to mature in 2026 and 2027.

Louisiana will sell its refunding GOs in two series that will be priced as $213.6 million maturing from 2013 to 2022, and $161.5 million maturing from 2011 to 2021. The bonds are rated Aa2 by Moody’s, AA-minus by Standard & Poor’s, and AA by Fitch.

Last week’s largest deal was an $829 million senior-lien sales tax revenue BAB sale from Dallas Area Rapid Transit. It was priced last Tuesday by Bank of America with a 2048 final maturity that yielded 5.02% at par and came 130 basis points over the comparable Treasury yield at the time of pricing.


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