Deals from Hawaii and the New Jersey Economic Development Authority are expected to lead a brisk primary market as issuers are forecast to bring almost $5.8 billion this week. The figure doesn’t include a $1.7 billion financing from bankrupt Jefferson County, Ala., that may price as early as this week.
The anticipated volume would help get November off to a good start on the heels of a 28% decline in long-term volume for October from the same period last year, as reported by Thomson Reuters.
“In the absence of major supply, the tone of the municipal market remains positive,” said Dave Manges at BNY Mellon Capital Markets.
The new-issue market is facing an anticipated $5.77 billion in long-term deals this week, according to Ipreo LLC and The Bond Buyer. Last week municipalities sold a revised $5.05 billion, according to Thomson Reuters.
“It looks like investor flows into tax-exempt [mutual bond] funds have reached a neutral point or close to that which is good news,” Manges said Friday. “The tone has been good for new issuance, and major deals this past week have been well received.”
On Friday, the benchmark, triple-A GO scale in 2043 ended at a 4.06%, after ending at a 4.04% on Wednesday and Thursday, according to Municipal Market Data.
Michael Pietronico, chief executive officer at Miller Tabak Asset Management said his firm sees the municipal market “correcting from an over-bought condition, and as such we expect yields to turn higher as we await the next payrolls number.”
Hawaii’s $850 million general obligation deal will lead off the negotiated activity. It expects to issue a two-pronged financing scheduled for pricing by Bank of America Merrill Lynch & Co. on Tuesday, following a two-day retail order period that began Friday and concludes on Monday.
The deal consists of $806.91 million of tax-exempt bonds and $44.7 million of taxable GO debt rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s.
The New Jersey Economic Development Authority will sell an estimated $437 million of revenue bonds on Tuesday as serial bonds that mature from 2020 to 2028, and term bonds maturing in 2031, 2034, 2039, 2043, and 2052.
The bonds, which will be subject to the alternative minimum tax, are rated BBB-minus by Standard & Poor’s and Fitch and will finance the Goethals Bridge Replacement Project in New Jersey.
The Kentucky Higher Education Student Loan Corporation will issue $384 million of floating-rate notes linked to the London Interbank Offered Rate. Bank of America Merrill will price the bonds on Monday with a AA-plus from Standard & Poor’s and AAA from Fitch.
Massachusetts will sell revenue bonds in two series totaling $648.9 million scheduled for pricing by Bank of America.
The $362.9 million offering of transportation fund revenue bonds is structured as serials from 2023 and 2037 and term bonds in 2040 and 2043 and will be priced on Tuesday, following a retail order period on Monday. The $286 million series of federal highway grant anticipation notes will mature serially from 2016 to 2027 and will be priced on Wednesday following a two-day retail order period.
Both series are rated triple-A by Moody’s and Standard & Poor’s.
The San Francisco Bay Area Rapid Transit District is planning to sell $240 million of GO bonds on Wednesday following a retail order period on Tuesday led by JPMorgan Securities, while the Los Angeles Department of Airports plans to sell $245.1 million of debt in a two-pronged deal that consists of $172.8 million of senior revenue bonds subject to the alternative minimum tax maturing serially from 2024 to 2033 with term bonds in 2038 and 2043.
These deals could be overshadowed by Jefferson County’s planned $1.7 billion sale of sewer warrants, though these would price at distressed levels, municipal experts noted.
“Any issuer that has seen as much negative headlines as Jefferson County should expect to see yields dramatically higher than where the rest of the market is borrowing,” Pietronico said. The county announced the sale of the refunding bonds this month as part of its bankruptcy exit plan to deal with $3.2 billion of sewer debt. It previously planned to issue $1.9 billion of sewer refunding warrants around Dec. 20.
A confirmation hearing on the bankruptcy exit plan is set for Nov. 12.
