Supply Infusion Perks up the Primary Market as Billion-Dollar Deals Arrive

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Volume is expected to edge up for the second week in a row as over $7 billion is predicted to arrive in the primary market, anchored by a pair of billion-dollar deals from New York and California.

The supply will be well received by supply-starved investors, a New York trader said Friday.

"The extra supply negotiated-wise is a good thing," he said. "There's tons of cash out there and the customers want to buy new paper."

Ipreo LLC and The Bond Buyer reported that $7.81 billion of long-term new issuance is headed to market this week. The fresh supply comes on the heels of a revised $5.5 billion last week, as reported by Thomson Reuters, after $6.02 billion was originally expected.

Issuance was last estimated higher than this week's volume in the week of June 23, when $8.9 billion was anticipated, The total that week was later revised down to $7.6 billion, as reported by Thomson.

The New York trader said the market had a solid tone, buoyed by news of unchanged rate policy following the Federal Open Market Committee meeting earlier in the week, Friday's strong employment report, and news of the forward supply bulge.

He expected strong demand for the pricing of the dual billion-dollar deals on Tuesday - the larger of which is a $2.09 billion sale of California general obligation and refunding bonds being senior-managed by Wells Fargo Securities.

The bonds, which are structured in four series, consist of $940 million of various purpose GO bonds, $200 million of various purpose GO green bonds, $950 million of various purpose GO refunding bonds; and $200 million of GO bonds with a mandatory put. The green bonds are being senior managed by Bank of America Merrill Lynch & Co.

The California GOs are rated Aa3 by Moody's Investors Services and A by both Standard & Poor's and Fitch Ratings.

The New York trader said the week's second largest deal, a $2 billion sale by the New York Sales Tax Asset Receivable Corp., could be oversubscribed due to the strong pent up demand for new paper and credits that are infrequent issuers.

Slated for pricing by senior manager JPMorgan Securities on Tuesday following a two-day retail order period that ends on Monday, the sales tax asset revenue bonds are structured as serials that mature from 2015 to 2033 and are rated Aa1 by Moody's, AAA by Standard & Poor's, and AA-plus by Fitch.

In the competitive market, a $1.2 billion Massachusetts revenue anticipation note offering is planned for Tuesday. The deal consists of three series of bonds sized at $400 million each, all rated MIG1 by Moody's, SP1-plus by Standard & Poor's, and F1-plus by Fitch.

The Texas Public Finance Authority will issue $500 million of taxable debt on behalf of the Texas Windstorm Insurance Association in a Bank of America-Merrill led deal pricing on Tuesday.

The Board of Governors of the University of North Carolina at Chapel Hill is planning to sell $265 million of general revenue refunding bonds in a taxable deal led by Wells Fargo that is pricing on Tuesday and structured to mature from 2016 to 2020.

The bonds are rated triple-A by all three major rating agencies.

San Antonio will round out the larger negotiated activity with its $263 million sale of electric and gas system junior lien revenue refunding bonds.

Bank of America-Merrill will price the bonds on Tuesday on behalf of the San Antonio City Public Service with a serial structure and ratings of Aa2 by Moody's, AA-minus by Standard & Poor's, and AA-plus by Fitch.

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