Massachusetts' $490M Deal Tops Another Skimpy Slate

Despite attractive borrowing rates, issuers continue to hold back, with new-issue volume slipping for a third week, putting it on schedule to be the fourth-slowest so far this year.

The market is expecting $2.95 billion of new issuance this week, down from a revised $3.9 billion last week and $4.27 billion the week before, according to Ipreo LLC and The Bond Buyer.

The only weeks that saw smaller volume was the first week of January, with $932.5 million, the week of March 13 with $2.64 billion, and the week of March 27 with $2.65 billion.

This week’s estimated $2.95 billion consists of $749.1 million of competitive offerings, compared with a revised $1.17 billion last week. Slated for this week are $2.19 billion in negotiated deals, versus a revised $2.73 billion last week.

And while tax-exempt yields experienced a slight correction last week, it is still a relatively good time for issuers to come to market. The 10-year triple-A tax-exempt yield closed at 2.64% on Friday, according to Municipal Market Data. The 30-year closed at 4.31%, while the two-year closed at 0.44%.

After almost a month of steady or higher prices, the market retreated last Thursday, prompting MMD’s Domenic Vonella to write: “If we learned one thing from today, it is that the market is skittish at current ratios and yield levels.”

However, he added, “The Street seems content at current ratios, especially given seasonals and positive supply technicals that have been and are expected to continue to support the market.”

One of the largest issues last week came to market on Wednesday, when Oregon sold $310.6 million of general obligation bonds.

Underwritten by Citi, the deal was rated AA-plus by Standard & Poor’s and Fitch Ratings, and Aa1 by Moody’s Investors Service. Yields ranged from 0.30% in 2012 to 4.58% in 2036.

Citi analysts agreed that support for the muni market should remain strong as relatively low issuance keeps investors starved for buying opportunities.

“The impressive recent rally and support for the muni market cannot be ignored,” wrote George Friedlander. “Continuing very light supply, this is on track to total roughly $95-$100 million for the first half of 2011. This represents the lightest half-year since the second half of 1996 — nearly 15 years ago.”

The biggest deal comes in the negotiated market this week with $490 million of GOs from Massachusetts, comprised of $485 million of Series 2011B bonds and $5 million of Series 2011C Build Massachusetts Bonds.

Underwritten by JPMorgan, the bonds are rated Aa1 by Moody’s, AA by Standard & Poor’s, and AA-plus by Fitch.

Fitch said Massachusetts has a “fundamentally strong and wealthy economy” with the second highest personal income per capita in the nation and has “benefited from conservative budgeting and sound financial practices over time.”

However, the rating agency said there are high levels of debt.

The Massachusetts bonds were priced for retail Friday, with yields ranging from 0.52% to 3.61% and maturities ranging from 2012 to 2025.

On Wednesday, the Erie County, N.Y., Industrial Development Agency will sell $284 million of school facility revenue bonds.

The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s, and underwritten by Citi. The Series 2011A bonds come with maturities ranging from 2013 to 2032.

The next largest deal will come from the Lansing, Mich., Board of Water and Light, which will offer $250 million of Series 2011A utility system revenue bonds. They are expected to come to market on Tuesday and are underwritten by Bank of America Merrill Lynch. They are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.

On Wednesday, the Pima County, Ariz., Regional Transportation Authority will offer $151.3 million of transportation excise tax revenue bonds.

The Series 2011 bonds are underwritten by RBC Capital Markets. They are rated Aa3 by Moody’s and AA by Standard & Poor’s.

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