Muni Volume Should Creep Up to $6.4B

The municipal market, sliding leisurely through its slow season, is anticipating a slight uptick in issuance the week of Aug. 6.

Industry estimates hold that muni bonds expected to be sold during the week should total $6.35 billion versus a revised $5.93 billion last week. Then, the market waded through a sluggish week in the primary and secondary that did little to yields, which continue to hover near record lows.

The week of Aug. 6 promises no issues above $1 billion. Still, the New York City Transitional Finance Authority is expected comes to market with a hefty $850 million of future tax-secured bonds and subordinate bonds on Wednesday.

The week's new deals should find a hungry audience, said Phil Villaluz, head of municipal strategy at Sterne Agee. Investor appetite remains strong among those who must put their money to work, despite anchor-dropping muni yields.

"Between the reinvestment cash out there and the manageable supply, deals are getting done relatively easily," he said. Investors are "being selective on credit, given the recent California bankruptcies. You're going to see the focus remain high grades with solid underlying fundamentals."

A closer look at the numbers shows $2.28 billion in competitive offerings scheduled for sale, compared with a revised $1.77 billion last week. Also, $4.07 billion in negotiated deals are slated, versus a revised $4.16 billion the week of Aug. 6.

Among negotiated deals, Bank of America Merrill Lynch is expected to price $850 million of the TFA future tax- secured bonds and subordinate bonds on Wednesday. The bonds are rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's and Fitch Ratings.

There will be a two-day retail order period starting Monday. Institutions will have a crack at it on Wednesday. The bonds should arrive structured in two series of serials — the first, $750 million, maturing from 2013 through 2032; the second, $100 million, maturing from 2014 through 2017 and from 2024 through 2026.

Despite arriving with nearly a triple-A rating in the low-rate environment, the deal would still find buyers, said Chris Ryon, a managing director and co-portfolio manager at Thornburg Investment Management. It would likely interest those investors with money on the sidelines, he added, or who may be more risk-averse than others, in terms of credits.

"The TFA refunding will be a barometer for the market," Ryon said. "There's been a lot of New York paper that's been issued the last few weeks, and I haven't heard they've had problems getting them done."

Barclays Capital on Wednesday is expected to price $729 million of Chicago O'Hare International Airport senior lien revenue refunding bonds in three series. The bonds are rated A2 by Moody's and A-minus by Standard & Poor's and Fitch.

Credits in the first two series, $445.9 million and $251 million, should arrive structured as serials, maturing in 2013 through 2032. Bonds in the third series, $32.1 million, should be structured as serials, maturing from 2014 through 2018.

Citi should price $630 million of New Jersey Economic Development Authority special facility revenue bonds, subject to the alternative minimum tax, for Continental Airlines in three series. The bonds are rated B3 by Moody's and B by S&P.

The bonds, expected to arrive on Thursday, will come structured in three terms: $299.4 million maturing in 2023, $184.2 million maturing in 2019 and $146.5 million maturing in 2023.

On the competitive side of the market, Minnesota and Washington are both coming to market with a pair of large deals. On Tuesday, Minnesota should auction $422 million of various-purpose general obligation bonds and $234 million of GO state trunk highway bonds. Both series are rated AA-plus by Standard & Poor's and Fitch and should arrive structured as serials, maturing from 2013 through 2032.

Washington is scheduled to auction $364.5 million of motor-vehicle fuel tax GO refunding bonds, as well as $338.7 million of various-purpose GO refunding bonds. Both series are rated Aa1 by Moody's and AA-plus by Standard & Poor's and Fitch.

The bonds are expected to arrive Tuesday structured as serials, with the heavier series maturing in 2013 through 2030. Credits in the second, lighter series should mature in 2016 through 2030.

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