The second quarter will begin as the first quarter ended, with volume this week on the sparse side.
Ipreo LLC and The Bond Buyer anticipate long-term new volume will hover around $4.19 billion this week, versus last week's revised $4.78 billion reported by Thomson Reuters. The dearth of supply is frustrating for some traders.
"We're just being held down by the lack of supply," said Mike Cornell, managing director at R. Seelaus & Co. "We need supply," he said, describing the market as "like a Friday in the summer."
An abundance of cash sitting on the sidelines is waiting to be spent on new deals, he said, even though this is a "historically tough time with tax season" approaching, in addition to low yields. On Friday, the generic triple-A general obligation scale in 2044 ended at 3.63%, according to Municipal Market Data.
The University of California Regents will test the appetite for new paper when it introduces its first bond sale of the year — and the week's largest — amid a smattering of other education deals.
It plans to sell $950 million of general revenue bonds in a two-pronged sale slated for pricing by co-senior managers Wells Fargo Securities and Goldman, Sachs & Co. on Thursday, following a retail order period on Wednesday.
The deal comes after a downgrade from Moody's Investors Service to Aa2 from Aa1, which cited years of operating deficits, rising fixed costs, revenue constraints, and agrowing debt burden.
The Moody's outlook is stable. Analysts said the system faces a variety of risks in the next few years, including declining operating balance-sheet metrics, growing pension and other post-employment benefit liabilities, significant maintenance needs, upcoming debt plans and pressure on all major sources of revenue.
The bonds are rated AA by Standard & Poor's. The structure includes $408.75 million of taxable bonds and $560 million of tax-exempt paper, with maturing serial bonds from 2017 to 2034 and term bonds in 2044 and 2049. Proceeds will fund acquisition and construction of projects throughout the university's campuses.
The university last came to market in October with $450 million of weekly
variable-rate general revenue bonds, and in September with $1.9 billion of fixed -ate general revenue bonds.
Other education deals scheduled for this week pale in comparison to the size of the California offering. The University of Texas System's Board of Regents is set to sell $270 million of revenue financing bonds on Tuesday in a Wells Fargo-led deal.
The offering is rated triple-A by all three major rating agencies and is structured with serials from 2015 to 2036 and term maturities in 2042 and 2044.
The San Diego Unified School District is preparing its $261.1 million sale of general obligation bonds, which are scheduled to be priced by Goldman on Tuesday after a retail-order period on Monday.
The sale consists of $195.6 million of GO current-interest refunding bonds maturing from 2015 to 2029, $15.48 million of new-money current interest bonds maturing in 2014 and 2016, and $50 million of new-money capital appreciation bonds maturing in 2031 to 2038. The bonds are rated Aa3 by Moody's, and AA-minus by Standard & Poor's and Fitch.
Elsewhere in California, a $250.65 million sale of new-money and refunding GOs is being prepped by the San Jose-Evergreen Community College District. Slated for pricing on Tuesday by RBC Capital Markets, the bonds are rated Aa1 by Moody's and AA by S&P.
Outside the education sector, the Karegnondi, Mich., Water Authority is on tap to sell $220.5 million of water-supply system revenue bonds when JPMorgan prices the deal on Tuesday after a retail order period on Monday. The bonds are rated A2 by Moody's and A-plus by Ratings, and will mature in a structure of serials and terms, but the details were still being finalized at press time, a source at the firm said.
