The holiday shortened week's volume will drop to just over half of last week's issuance, led by a $350 million Texas school offering.
Ipreo LLC and The Bond Buyer predict that volume will decrease to $2.27 billion - roughly half of last week's revised $4.48 billion as reported by Thomson Reuters, which featured a highly-anticipated and oversubscribed $1.8 billion Detroit water and sewer deal.
Demand remains strong for municipal securities given the overall supply shortage year to date, sources said.
"At the end of the day municipals continue to offer stability, preservation of principal and tax-free income in a world where the tax burden is only increasing," said Sean Carney, municipal strategist at BlackRock Inc. "Mid-term elections and greater Fed involvement in the fourth quarter are certainly on our radar as events that can change current sentiment but the demand component will remain solid for this unique asset class particularly from individual investors in high tax states."
This week, investors looking for high-quality paper in the new-issue market will have two triple-A-rated deals to choose from - including the Houston Independent School District limited tax schoolhouse bond offering, which is the week's largest - deal as well as one of two variable-rate deals.
Planned for pricing by Morgan Stanley & Co. on Wednesday, the Houston ISD deal is backed by the Texas Permanent School Fund.
Texas' La Porte Independent School District will also be in the market with $110 million of unlimited tax school building bonds on Wednesday in a deal structured to mature serially from 2015 to 2039 and priced by First Southwest Securities.
The Harbor Department of Los Angeles, meanwhile, will issue $345 million of revenue and refunding bonds in a negotiated deal scheduled for pricing on Thursday by Wells Fargo Securities after a retail order period on Wednesday. The serial and term bond structure will include bonds subject to the alternative minimum tax and non-AMT bonds, and the bonds are rated Aa2 by Moody's and AA by Standard & Poor's.
One of the only sizable deals in the competitive market is a three-pronged variable-rate revenue and refunding offering from New York's Metropolitan Transportation Authority totaling $226.47 million and slated for Thursday.
The structure includes $84.4 million transportation revenue variable-rate refunding bonds due in 2019, $42.5 million of transportation revenue variable-rate refunding bonds due in 2018, and $99.5 million of transportation revenue variable-rate bonds due in 2041 - all of which are tied to the London Interbank Offered Rate.
In the California negotiated market, the San Mateo County Community College District is planning a $119 million general obligation refunding on Thursday in a negotiated pricing led by Morgan Stanley. The bonds are rated triple-A by both Moody's and Standard & Poor's.
The week's activity pales in comparison to last week when Detroit overcame the stigma of Chapter 9 and successfully priced its $1.8 billion sale of water and sewer bonds that traders said benefited from market timing, yield hungry investors, bonds insurance, and upgrades from all three major rating agencies.
Priced by Citi through the Michigan Finance Authority, the deal included $1.64 billion of refunding bonds. The bonds rallied by the end of business on Thursday, with yields on the 5% coupons in 2044 dropping 35 basis points to 4.50% in the secondary market, according to traders.
On Thursday, the generic, triple-A general obligation scale in 2044 ended at a 3.04%, according to Municipal Market Data.
