The Northeast will be a focal point of activity this week when the New Jersey Economic Development Authority and the New York City Transitional Finance Authority team up to bring the first two meaty deals of the new year to market.
The offerings are part of an estimated $5.03 billion in new volume, according to Ipreo LLC and The Bond Buyer.
Underwriters say the deals could positively impact the market if investors treat them as benchmark deals and they help establish new trading levels that will kick-start demand in the wake of the outpouring of more than $15 billion from mutual bond funds in recent months.
This week’s slate will be a welcome improvement from the recent seasonal sluggishness. Issuers priced just under $400 million while much of the market was still in holiday mode last week, according to Thomson Reuters.
“The market feels fairly difficult and there is very little visibility after nine weeks of outflows among mutual funds,” a New York underwriter said. “There is very little issuance and usually not much going on right after the holidays, so the real test will come in the second and third weeks of January.”
The New Jersey EDA deal will consist of $1.9 billion of school facility construction bonds. The New York City TFA will sell $875 million sale of future tax-secured subordinate bonds.
The deals could influence the market for highly rated debt and also help reprice the market if the bonds inside of 17 years are priced accordingly, the trader said.
“That’s a tough part of the curve,” he said. “There are not a lot of buyers in the 10- to 20-year part of the curve and if that doesn’t do well it will be tough, but if it does do well, then that can potentially change the psychology of investors.”
Last Friday, the generic, triple-A general obligation scale in 2041 ended at a 4.74% yield — up six basis points from 4.68% on Monday, according to Municipal Market Data.
The EDA deal will be priced for retail on Tuesday and for institutions on Wednesday by senior book-runner Bank of America Merrill Lynch.
The issue, which is rated AA-minus by Standard & Poor’s, consists of $1.46 billion of refunding bonds, $245 million of taxable refunding bonds, and $240 million of refunding notes that will bear interest at the adjusted SIFMA rate.
The TFA deal will be priced by Barclays Capital on Wednesday, following a two-day retail order period beginning Monday.
The bonds are structured to mature serially from 2012 to 2031 and include two term bonds. They are rated A2 by Moody’s Investors Service, A by Standard & Poor’s, and A-plus by Fitch Ratings.
A $1.3 billion New York Liberty Development Corp. sale of Liberty bonds remains on the day-to-day calendar, where it has been since December because of its rate-sensitive nature, according to a source at book-runner Goldman, Sachs & Co.
The revenue bonds are to be sold on behalf of Silverstein Properties Inc. to help fund the construction of Tower Four — also known as 150 Greenwich Street — which is part of a complex of skyscrapers under construction at the World Trade Center site in lower Manhattan.
The New York underwriter said the size of this week’s calendar is fairly manageable and fairly typical for this time of the year.
“We need money coming into our market, and until that happens we will have a wait-and-see approach. People are more cautious and hesitant of new issues going forward,” he said. “It might just take one benchmark deal to sort of pull people in.”
In other activity, Seattle will make an appearance in the competitive market with a two-pronged sale that consists of $297.8 million of municipal light and power improvement and revenue refunding bonds, and $10 million of light and power revenue debt being sold as taxable clean renewable energy bonds.
The Series 2011A refunding bonds are expected to mature serially from 2011 to 2026, and from 2028 to 2036, while the Series 2011B taxable bonds are expected to mature in 2027.
Secured by gross revenue of Seattle’s municipal utility and money in the parity and reserve funds, the bonds will finance capital improvements to the light system, including a conservation project, and refund some of the outstanding light and power bonds.
Washington State will sell $175 million of sewer revenue bonds on Monday that are structured to mature from 2014 to 2041 and are rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
Wisconsin, meanwhile, will bring a $428.7 million competitive GO sale to market on Wednesday. The bonds are structured to mature from 2012 to 2031.
