A $775 million New York City Transitional Finance Authority offering and a $468 million Minnesota state general fund appropriation bond sale will arrive in the primary market as investors decide how and where to reinvest Jan. 1 coupon payments and redemptions.
Given last week's skimpy new-issue calendar, a spotty secondary supply in certain states, a 6% drop in December's volume, and a strengthening of the market so far this year, the large new deals should garner attention.
"Unlike the early weeks of 2013, it can be said that 2014 opens up on a stronger footing for municipal bond demand as market yields have corrected higher - especially those further out the yield curve," said Michael Pietronico, president of Miller Tabak Asset Management.
According to Ipreo LLC and The Bond Buyer, an estimated $4.87 billion will enter the market this week on the heels of just $1.82 billion in the first full trading week of the New Year last week, according to Thomson Reuters.
"We see substantial interest developing for both New York and Massachusetts paper for deals pricing in the near term as the secondary market float for bonds from those states is rather anemic at the moment," Pietronico said.
The TFA's future tax secured subordinate bonds are slated to be priced for institutions by JPMorgan on Thursday following a two-day retail order period on Tuesday and Wednesday, The structure was not yet available, according to a source at the firm late Friday.
The bonds are rated Aa1 by Moody's Investors Service and triple-A by both Standard &Poor's and Fitch Ratings.
The Minnesota offering is expected to price on Tuesday following a retail order period on Monday by book-runner RBC Capital Markets. Rated AA by Standard & Poor's and Fitch, the bonds are secured by a continuous general fund appropriation for debt service for the life of the bonds, barring any legislative repeal.
The deal is comprised of $397.68 million of tax-exempt bonds in Series 2014 A and $70.25 million of taxable securities in Series 2014 B.
Adding to the primary volume, deals from Arizona, Florida, and California will also make an appearance.
A $292.29 million taxable offering is on tap from La Paz County, Ariz., Industrial Development Authority when Raymond James prices the senior lien project revenue bonds on Thursday. Structured as serial bonds maturing from 2014 to 2033, the bonds are rated BBB by Standard & Poor's.
The Jacksonville Electric Authority will issue $250 million of senior and subordinate electric system revenue bonds slated for pricing by RBC on Wednesday. The senior bonds are rated Aa2 by Moody's and AA-minus by Standard & Poor's, while the subordinate bonds are rated Aa3 by Moody's and A-plus by Standard & Poor's. Fitch rates both the senior and subordinate bonds AA.
In California, the city and county of San Francisco are preparing a $209.95 million sale of general obligation bonds for competitive pricing on Thursday with a serial structure maturing from 2014 to 2033.
Last week's largest deal was a $240 million Permanent University Fund offering from the University of Texas that was rated triple-A by all three rating agencies and was priced by JPMorgan with a 2041 bullet maturity at a 4.27% yield -- 14 basis points higher than the generic GO scale published by Municipal Market Data on the day of pricing.
On Friday, the 30-year generic triple-A GO scale in 2044 rallied compared with their taxable counterparts and ended down nine basis points at 4.01%, according to MMD. Despite the richness, 30-year municipal yields still offer more than 105% of the Treasury counterpart on a relative value basis, according to MMD.
"Miller Tabak Asset Management sees the early weeks of 2014 as being ripe with demand for tax-free bonds as investors are confronted with a stock market that is at multi-year highs and bank deposit accounts that yield next to zero," Pietronico said.
