As the end of summer approaches and supply continues to dwindle, weekly volume in the municipal market is expected to sink to $2.53 billion, the lowest level in almost six months. A $480 million offering from the Virginia Public Building Authority is the largest deal on the new-issue calendar this week.
Ipreo LLC and The Bond Buyer's weekly estimate is down from the revised $3.46 billion that actually came to market last week as reported by Thomson Reuters. The original estimate was $4.23 billion.
"The market should react positively to the deals it's pretty starved," said John Mousseau, managing director at Cumberland Advisors in Vineland, N.J.
The Virginia building deal will enter the competitive market with its three-pronged revenue bond offering on Wednesday. The series will consist of $317.13 million, followed by $117.94, and $44.61 million, all of which are rated AA-plus by Fitch Ratings.
The only other sizable competitive deal is expected to be a $106.22 million revenue sale from Fayetteville, N.C., which is rated Aa2 by Moody's Investors Service and AA by both Standard & Poor's and Fitch.
In the negotiated market, a $160.87 million sale from Austin, Texas, is set to be sold in three series consisting of $104.62 million of public improvement bonds; $40.4 million of certificates of obligation; and $15.80 million of public property finance contractual obligations.
Robert W. Baird & Co. will price the deal on Wednesday.
A $116 million Bossier City, La., utilities revenue refunding will be priced on Wednesday by Stephens Inc. Structured to mature serially from 2015 to 2038, the bonds are rated A1 by Moody's and AA-minus by Standard & Poor's.
This week's anticipated volume is the least since the week ending Feb. 28 when $2.49 billion actually came to market, according to Thomson Reuters.
"Buyers continue to look for bonds, as evidenced by continuing inflows," said Alan Schankel, managing director of municipal strategy at Janney Montgomery Scott.
The upcoming quiet week is all part of a seasonal slowdown that the market plans for ahead, according to other municipal experts.
"The municipal market is used to, and expects, this week to be slow, with light new issue volume," said John Donaldson, vice president and director of fixed income at The Haverford Trust Co. in Radnor, Pa.
"Post-Labor Day the deals will ramp up and the real pressure starts with a ton of current refundings as we approach year end," Mousseau said. "Obviously that isn't a lot of net new supply, but the markets still have to clear. That should produce a blip up in intermediate and longer tax-exempt rates."
Michael Pietronico, chief executive officer at Miller Tabak Asset Management, said the expected supply this week is too thin overall to "knock the market out of its current tight range."
Outside of the long-term market this week, a $5.4 billion tax and revenue anticipation note sale from Texas is slated for the short-term competitive market on Monday, although municipal experts said it will be less of a general market offering.
Mousseau said the deal will be of interest mostly to institutional accounts, such as cash funds and short term funds, with the possibility of some demand from high net worth individuals.
"Texas doesn't have a state personal income tax, so there isn't even a built in demand like California notes have," Donaldson said.
"The Texas TRAN deal should garner significant institutional demand if priced attractively for crossover investors to consider," Pietronico added.
