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The Week Ahead

Primary Full Again This Week

Following last week's post-Thanksgiving feast, the municipal market will continue to usher in December with an equally hearty slate of primary market deals. Yields remained mostly firm on Friday as investors clamored for high-quality paper in the scarce secondary.

New York and Puerto Rico will again dominate the long-term negotiated activity, while a mammoth New Jersey note sale will top the short-term market.

Dave Manges, managing director of municipal trading at BNY Mellon, said the market has shown a lot of resilience in dealing with steady volume in the last month.

"The municipal market has been able to show surprising demand even in the face of Treasury market turmoil," he said. "Deals have gotten a good response. I think the syndicate balances are not overly heavy and the tone of the market feels fairly positive right now."

That bodes well for the estimated $5.81 billion of long-term volume expected this week, according to The Bond Buyer and Ipreo. A revised $5.88 billion entered the market last week when the triple-A GO bond in 2041 ended at a 3.83% yield, which was down three basis points from Thursday.

This week's slate includes $4.20 billion of negotiated deals, down slightly from last week's $5.01 billion, while competitive volume will increase to $1.61 billion from $865.9 million.

The level of supply should remain relatively manageable over the week as the holiday season picks up, Municipal Market Data analysts Randy Smolik and Domenic Vonella wrote in a research post.

The largest single deal is $2.15 billion of tax and revenue anticipation notes from New Jersey.

The Series 2012C fixed-rate Trans are scheduled to mature on June 21, 2012. Proceeds will provide cash flow to the general fund and the property tax relief fund during fiscal 2012, as well as principle and interest on previous notes and the cost of issuance, according to the preliminary official statement.

Meanwhile, in the long-term market, a $550 million revenue offering from the New York City Transitional Finance Authority will lead the pack. The building aid revenue bonds, which are being priced by Morgan Stanley for retail investors on Monday and Tuesday and for institutions on Wednesday, are rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings.

The Puerto Rico Public Finance Corp. is scheduled to sell $400 million of commonwealth appropriation bonds Wednesday, senior managed by Barclays Capital. The bonds are rated Baa2 by Moody's and BBB-minus by S&P. The structure was not finalized at press time.

Last week, a $1 billion corporate sales tax revenue offering from the Puerto Rico Sales Tax Financing Corp. managed by Citi on Thursday included a final 2046 maturity that carried a 5% coupon at par and was the largest deal of the week.

"Puerto Rico traded up nicely today," Manges said Friday.

"The key is matching the yield to investor appetite," he said of this week's upcoming Public Finance Corp. offering. "I have no doubt that at an appropriate level, it will meet good reception."

Elsewhere in the negotiated market, $380 million of second resolution water and sewer revenue bonds is on tap from DeKalb County, Ga. The deal, which is rated Aa3 by Moody's and A-plus by Standard & Poor's, is slated to be priced by Siebert, Brandford Shank & Co. on Monday.

A $355.4 million financing for Sutter Health in California will be priced by Morgan Stanley for retail investors on Wednesday and for institutions on Thursday. The offering is rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch. It will include Series 2011 revenue bonds issued through the California Statewide Communities Development Authority and Series 2011D revenue bonds issued by the California Health Facilities Financing Authority, but the final structure was not available at press time.

In the competitive market, New York State will sell a total of $316.9 million of general obligation bonds in a two-pronged deal slated for Tuesday. The larger of the series consists of $285.9 million structured to mature from 2012 to 2041, while the other, $31.1 million of taxable GOs, will mature from 2012 to 2021.

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