Weekly municipal volume is set to increase to a three-month high, led by bond sales from the University of California and New York City.
Ipreo and The Bond Buyer estimate volume will surge to $12.44 billion for the week of March 9, from a revised $7.44 billion for the week of March 2, as reported by Thomson Reuters. That would be the biggest week of issuance since the market absorbed a revised total of $12.9 billion for the week of Dec. 8.
Prices of top-rated municipal bonds plunged at midday on Friday, traders said, after the release of a strong employment report that many see as giving a green light to a mid-year interest rate hike by the Federal Reserve. Yields were up by as much as eight basis points on some top-shelf munis.
"We have a great amount of volume next week; the treasury market has so much steam," said a New York trader. "Treasuries have moved 65 basis points in over a month. We have a long way to keep going but you will see some buying and flattening out yields. Yields really need to back out and get to an approachable level, that magical level, wherever it is so that we can see retail flood back in and get some paper."
According to the trader, there may be a few stragglers in some maturities but deals are still getting done and he expects the same to continue for the week of March 9. "We need higher rates, this is good for the market," he said.
For a second straight week the largest deal will be from the golden state. The University of California is bringing a total of $2.8 billion to the market, in two revenue bond sales.
"The UC system is an extremely strong credit and it's going to get cheap financing," said Michael Ginestro, director of municipal research for Beverly Hills-based Bel Air Investment Advisors LLC.
Barclays is the lead manager on both University of California Regents sales, which each involve the same 21-member underwriting syndicate.
Raymond James is co-manager on the two series of limited project revenue bonds: a $1.2 billion tax-exempt 2015 Series I and $440 million taxable 2015 Series J.
Stifel is the co-manager on the two general revenue bond series: the tax-exempt $770 million Series AO and taxable $370 million 2015 Series AP.
A retail order period will be held Tuesday for all series of the bonds. Institutional pricing for both general revenue bond series and the taxable limited project revenue bond will be Wednesday, followed by final pricing Thursday for the $1.2 billion Series I tax-exempt limited project revenue bonds.
The limited project revenue bonds received ratings of Aa3, A-minus and AA-minus from Moody's Investors Service, Standard & Poor's and Fitch Ratings, respectively. The general revenue bonds received ratings of Aa2, AA and AA. All assigned stable outlooks.
With the weather expected to start getting into the 50s soon in New York City, the city that never sleeps is hoping to heat up the market with its $800 million of general obligation bonds fiscal 2015 Series C and D. RBC Capital Markets is scheduled to price the deal on Thursday. The deal has expected ratings of Aa2 by Moody's and AA by both S&P and Fitch.
The city also plans to sell roughly $200 million of taxable fixed-rate bonds consisting of $100 million of new money bonds and a conversion of about $100 million of variable rate demand bonds to fixed-rate. The taxable bonds will be priced competitively on Thursday.
The NYC Metropolitan Transportation Authority is also expected to come to market with $300 million of transportation revenue bonds series 2015B. Bank of America Merrill Lynch is expected to price sale on Wednesday.
The weekly calendar includes $618 million of finance corporation tobacco settlement asset backed bonds for Rhode Island. Citi is expected to price the deal on Tuesday; the city of Dallas will bring roughly $579 million of waterworks and sewer system revenue refunding bonds, scheduled to consist of $452.8 million of tax-exempt and $125.8 of taxable bonds.
The deal is expected to be priced by Cabrera Capital Markets on Tuesday and is rated Aa1 by Moody's and triple-A by S&P; the state of Connecticut is slated to come with $500 million of general obligation bonds, consisting of $400 million of tax-exempt and $100 million of taxable. The deal is scheduled to be priced by Citi on Thursday; the city and county of San Francisco will bring $450 million of public utilities commission-2015A water system bonds. The deal is expected to mature serially from 2019 to 2036 and be priced by JPMorgan on Thursday. It is rated Aa3 by Moody's and AA-minus by S&P.
