This year's surge in municipal bond volume may be cooling as yields rise from January's near-historic lows.
Muni volume is forecast to come in at $7.211 billion in the week starting Feb. 9, according to Ipreo and The Bond Buyer. This is up from up a revised $6.921 billion that actually priced in the past week, according to Thomson Reuters.
The original estimate for the week of Feb. 2 was about $8.8 billion, but increasing yields made it less attractive to borrow in the muni market, prompting Trinity Healthcare to pull the biggest deal on the calendar, a $1.4 billion sale that was scheduled for Feb. 4.
Borrowing costs continued to rise after the Trinity deal was placed on day-to-day status, with the 10-year yield increasing 23 basis points to 1.95% Friday from 1.72% on Jan. 30, according to the Municipal Market Data triple-A scale. The 30-year yield has increased 25 basis points to 2.75% in the same period.
"The recent volatility we have seen is starting to impact the new issue market," said Dawn Mangerson, managing director at McDonnell Investment Management. "Some of the supply is drying up as refundings are not getting done."
Goldman Sachs on Thursday priced the $350 million taxable portion of the Trinity deal. Mark Melio of Melio & Co., Trinity's financial advisor, said that his firm doesn't want to price into a dislocated market given the strength and quality of Trinity's credit. "We expect to have a more stabilized market environment next week and if that's the case, hopefully we can get the deal done next week," he said.
About $5.456 billion of negotiated deals are scheduled for the week of Feb. 9 with South Carolina leading the charge.
Santee Cooper plans to sell $1.06 billion of revenue obligations for South Carolina Public Service. The deal is scheduled to be priced by Barclays Capital on Wednesday after a one-day retail order period on Tuesday. The deal is rated A1 by Moody's Investor Service, AA-minus by Standard & Poor's and A-plus by Fitch Ratings.
"It is way too soon to make a decision to pull that deal; as of right now we are still planning to go ahead with the sale," said Mollie Gore, manager, corporate communications for Santee Cooper. "I would point out this deal is partly new money and partly refunding as well."
Pennsylvania Higher Education Facilities Authority is coming to market with $300 million of fixed-rate revenue bonds for the Thomas Jefferson University. It will be priced by the Bank of America Merrill Lynch on Thursday after a one-day retail order period on Wednesday. The deal is rated A1 by Moody's and A by S&P.
Gwinnet County School District in Georgia will be coming to market on Wednesday with $240 million of general obligation refunding bonds. The deal is rated Aaa by Moody's and AAA by S&P.
There are $1.755 billion of competitive sales scheduled for upcoming week, as a familiar face is coming back to market, after it sold almost $1 billion in January. That would be Washington state, which is coming with three separate sales totaling about $484 million. All three series will go up for bidding on Tuesday, including $133.48 million of Series R-2015H general obligation refunding motor vehicle fuel tax bonds; $172.27 million of Series R-2015G GO refunding various purpose bonds and $177.865 million of Series R-2015F GO refunding motor vehicle fuel tax bonds. All three deals are rated Aa1 by Moody's and AA-Plus by both S&P and Fitch.
The other large competitive on the docket is from the Maryland Department of Transportation for $280 million of consolidated transportation bonds. It will go up for sale on Wednesday and is scheduled to mature serially from 2018 to 2030. The deal is rated Aa1 by Moody's, AAA by S&P and AA-Plus by Fitch.
