Hefty Slate Will Again Test the Market's New Levels

When issuers head to the municipal market with a bevy of sizable new offerings the week of March 18 they will be counting on more of the strong demand and less of the weakness that followed last week's largest deals and forced underwriters to institute some handsome yield concessions.

The largest benchmark deal to test the market's volatility will be the $1.4 billion revenue financing from the New Jersey Turnpike Authority. Planned for pricing by JPMorgan on Wednesday, it will headline an estimated $9.51 billion of new volume, according to The Bond Buyer and Ipreo LLC, compared to a revised $6.08 billion that was priced last week, according to Thomson Reuters.

The Series 2013 A turnpike bonds are rated A3 by Moody's Investors Service, A-plus by Standard & Poor's, and A by Fitch Ratings, however the structure was not yet available at press time.

Some municipal experts said that volatility is seasonal and is expected to give way to the beginning of some stabilization in the coming weeks.

"March has inflicted its historical pain and market yields are more compelling for investors," said Michael Pietronico, chief executive officer at Miller Tabak Asset Management. "Given the outsized returns so far in 2013 for the equity market, we suspect some investors will look back to municipals to protect their gains" in the weeks ahead.

The $2.16 billion California various purpose general obligation offering priced Thursday by JPMorgan was a deal that demonstrated the effects the weakness had on the pricing and spreads for large deals. Its 2038 maturity, for instance, was increased by 15 basis points in final pricing from the scale offered during the preceding, two-day retail order period, which itself saw yields were increased two basis points.

The state sold $795.4 million — or 37% — of the total tax exempt offering to retail investors during the order period, according to the State Treasurer's Office. But retail's take represented 89.4% of the $888.9 million of bonds that were originally offered to retail.

In addition, the spread on longer serial bonds backed up by 83 basis points compared to generic, triple-A scale tracked by Municipal Market Data, as the deal's arrival coincided with the fourth weaker trading session, during which the triple-A GO scale increased by as much as three basis points to 3.14% in 30 years, and by one basis point to 2% in 10 years.

The benchmark, 30-year triple-A GO ended at 3.14% yield on Thursday, according to MMD, after starting the week on Monday at a 3.08%.

The New York City Transitional Finance Authority is among the larger deals headed for pricing. The TFA will make an appearance with approximately $900 million of tax-exempt, future tax-secured subordinate revenue bonds and another $121 million of taxable debt expected in the competitive market on Wednesday. Wells Fargo Securities is expected to price the larger offering with a tentative structure of serials maturing from 2016 to 2032 after a retail order period on Monday and Tuesday. The bonds are expected to be rated Aa1 by Moody's, and triple-A by both Standard & Poor's and Fitch. The smaller, taxable TFA subordinate offering of qualified school construction bonds, meanwhile, will come in two series — $100 million structured in a 2038 term, and $21 million maturing as serial bonds from 2013 to 2022.

Massachusetts will join the Northeast activity with its two-pronged sale of GO bonds totaling $525 million scheduled for competitive pricing on Wednesday. The $450 million series is structured with serial bonds maturing from 2017 to 2043, while the $75 million series will mature serially from 2014 to 2018.

The Metropolitan Transportation Authority is slated to sell $500 million of transportation revenue bonds in a negotiated deal being senior-managed by Barclays Capital. The Series 2013 B bonds — whose proceeds will finance transit and commuter projects — will be priced on Thursday, following a retail order period on Wednesday. Serial and term bonds will be offered, but the structure had not yet been finalized at press time.

In the Far West, the State Public Works Board of California will issue $422 million of lease revenue bonds in a three-pronged deal being priced by Barclays. The bonds — which are expected to be rated A2 by Moody's, A by Standard & Poor's, and BBB-plus by Fitch — will be offered to retail investors on Monday, followed by the institutional pricing on Tuesday. The structure was still being hammered out at press time.

That deal will be joined by a $244 million GO refunding from the San Bernardino, Calif., Community College District. Priced by Piper Jaffray & Co. on Thursday, the deal is structured with serial bonds maturing from 2013 to 2033 and is expected to be rated Aa2 by Moody's and AA-minus by Standard & Poor's.

In the Southwest, the Arizona School Facilities Board will issue $315 million of taxable state school improvement revenue refunding bonds rated triple-A by all three major rating agencies. Bank of America Merrill Lynch will price the offering on Tuesday with a structure of serial bonds maturing from 2014 to 2020.

In Texas, a $305 million sale of hospital revenue refunding bonds is on tap from the Harris County Cultural Educational Facilities Financing Corporation. The bonds — sold on behalf of the Memorial Hermann Health System — will be priced by JPMorgan and rated A1 by Moody's, and A-plus by Standard & Poor's.

A $270.6 million sale of toll system revenue refunding bonds from the Miami-Dade County Expressway Authority is set for pricing by Bank of A Merrill on Thursday following a retail order period on Wednesday. The bonds — which are rated A3 by Moody's and A-minus by Standard & Poor's and Fitch — are structured to mature serially from 2013 to 2033.

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