Primary Quiet as Market Awaits FOMC Taper News

With the highly-anticipated Federal Open Market Committee meeting looming this week, municipalities have curtailed long-term bond issuance to just over $3 billion while they wait to see if the Fed announces its intentions to begin scaling back its bond buying efforts now -- as is widely expected -- or postpones the announcement until the December meeting.

According to Ipreo LLC and The Bond Buyer, an estimated $3.5 billion in long-term bond volume is expected to be priced this week -- noticeably less than the revised $5.9 billion of actual issuance reported by Thomson Reuters last week.

The week ended stronger than where it began as the benchmark 30-year triple-A general obligation bond closed at a 4.39% yield on Friday after starting out the week at 4.48%, according to Municipal Market Data. Traders said yields were high enough for investors to come off the sidelines -- after 15 consecutive weeks of outflows from municipal bond mutual funds -- where they had retreated due to uncertainty over the potential for the Fed to curb its $85 billion-a-month bond purchasing program.

“You had a firmer market today and people were scrambling for any high-grades they could find,” said a New York trader.

“There is talk about a stronger economy, but the economic data is not playing into that,” he said.

“The retail sales number wasn’t great,” he said, pointing to the lower-than-expected, 0.2% increase in last month’s retail sales reported by the Commerce Department on Friday. “The taper may not take place because there’s definitely some uncertainty out there.”

This week, an $800 million note sale from Massachusetts is set to price in the short-term market on Wednesday, but the largest long-term deal of the week is expected to be a $294.67 million sale of federal highway grant anticipation revenue bonds from Washington slated for pricing on Tuesday by Bank of America Merrill Lynch. The bonds, which are rated Aa3 by Moody’s Investors Service and AA by Standard & Poor’s, will be structured as serials maturing from 2015 to 2024 and proceeds will be used to finance bridge repairs and construction.

Dallas & Fort Worth, Texas, will sell $259.42 million of joint revenue refunding bonds on behalf of the Dallas/Fort Worth International Airport. Earmarked for pricing by Ramirez & Co. on Wednesday, the deal is structured with serial bonds maturing from 2014 to 2033 and secured by a first lien on pledged revenues and funds. The bonds are rated A2 by Moody’s, A-plus by Standard & Poor’s, and A by Fitch Ratings.

Colorado Springs is on tap to issue $130 million of utility system improvement revenue bonds in a negotiated deal being priced by JPMorgan Securities on Tuesday, following a retail order period on Monday. The issue is comprised of two series -- $59.82 million of Series 2013 B-1 and $70.22 million of Series 2013 B-2 -- both of which are structured serially from 2014 to 2033 with term bonds in 2038 and 2043 and are rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch.

In the competitive market, the Virginia College Building Authority will issue $332.71 million of educational facilities revenue bonds on Tuesday maturing from 2015 to 2034, while Ohio will bring $400 million of GO debt in three separate series on Tuesday.

The tax-exempt series include $116.72 million maturing from 2014-2033 and $183.28 million maturing from 2024 to 2033. The  taxable series is $100 million of GO bonds maturing from 2014 to 2023 and rated Aa1 by Moody’s, and AA-plus by the two other major rating agencies.

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