Demand for municipal bonds remains robust heading into the Labor Day holiday weekend, even if expected issuance does not.
Market watchers anticipate a strong appetite for the small morsels issuers have in store for the week.
Industry estimates hold that municipal bonds to be sold this week should total a paltry $1.55 billion, versus a revised $6.38 billion last week.
The amount marks the third-lightest calendar so far in 2012.
Though there aren't any large, benchmark issues expected this week, those that do arrive should still go well, said Burt Mulford, a portfolio manager and trader at Eagle Asset Management.
Because there won't be as many market participants at their desks near the end of the week, the bulk of the deals should arrive by Wednesday at the latest, he added.
Looking closer at the week's numbers, $278.5 million of competitive offerings are scheduled for sale, compared with a revised $1.38 billion last week. Also, $1.27 billion of negotiated deals are slated for sale, versus a revised $4.93 billion last week.
There's solid demand in the high-yield space from investors searching for incremental yield, said Paul Brennan, a portfolio manager at Nuveen Investments. There's also good demand in long bonds in general, he added.
Brennan continues to see very good inflows and demand closer to the front end of the yield curve, as well.
"It's in more limited-type products, short-term products," he said. "A lot of that is driven by investors who are not willing to put their money into cash or very, very short instruments, because they're not yielding anything, and therefore are extending maturities a few years in their quest to get some yield."
Among negotiated deals, Bank of America Merrill Lynch is expected to price $196.8 million of Columbus, Ohio, taxable and tax-exempt general obligation, various-purpose and limited refunding bonds in four series. The bonds, expected Tuesday, are rated triple-A by the major rating agencies.
The two tax-exempt series amounting to $129.6 million should arrive structured as serials, maturing from 2013 through 2026. The two taxable series, totaling $67.2 million, should arrive structured as serials, maturing from 2013 through 2022.
There should be some appetite for the triple-A Columbus deal, Mulford said.
"That could influence the [Municipal Market Data] scales," he added. "But really, the focal point has been on anything that's got some spread on it."
Piper Jaffray & Co. is expected to auction $90 million of California's Ohlone Community College GO refunding bonds. The debt is rated Aa2 by Moody's Investors Service and AA by Standard & Poor's.
The college bonds, expected Tuesday, should arrive structured as serials, maturing from 2013 through 2030.
The deal should generate interest among retail investors in California, Mulford said.
"It's a name that you don't see very often," he said. "A lot of retail investors in California are looking to shelter income. And there's a good likelihood that the state income tax is going to go up another 3% in California. So, that deal should go well."
Wells Fargo Securities Wednesday should price $79.6 million of Florida Municipal Power Agency Stanton II project revenue bonds. The bonds are rated A1 by Moody's and A-plus by Fitch Ratings.
Also, B of A Merrill is expected to price $60 million of Florida Municipal Power Agency St. Lucie project revenue bonds.
On the competitive side, the only deal of any size hails from the South Carolina Association of Government Organizations, which is expected to auction $109.2 million of short-term taxable and tax-exempt bonds in two series, as well as a series of long-term bonds. The bonds, expected Wednesday, are rated Aa1 by Moody's.
The first two series, $8.45 million of taxable debt and $88.67 million of tax-exempts, mature in March 2013. The third series, $12.06 million of tax-exempt debt, matures from 2013 through 2018.