The Week Ahead: Slim Pickings in a Holiday-Shortened Week

Municipal trading will be quieter with about $4.6 billion of new municipal bonds scheduled to be sold during the holiday-shortened week as issuers and underwriters watch for signs that yields are stabilizing.

Volume for the upcoming week is estimated to be $4.582 billion, according to Ipreo and The Bond Buyer. This is down from a revised total of $5.682 billion sold in the prior week, according to Thomson Reuters.

"Recent supply has been more than manageable," a Virginia trader said. "With a less volatile Treasury market, with muni rates stabilizing, and with tax season coming up reminding people of the value of munis, I expect all the new deals to get put away pretty easily."

Rates will also be in the sights on issuers, as the recent surge in yields starts to subside. Since the start of the past week, the yield on the top-rated muni 10-year benchmark general obligation has risen by eight basis points, while yield on the 30-year GO is nine basis points higher, based on Municipal Market Data's triple-A scale.

Since the beginning of February, the yield on the muni 10-year has risen 30 basis points and the yield on the 30-year has risen 36 basis points. Many participants see this as a market correction after yields declined in January to near record lows.

Many of the larger new issues coming to market will be top-shelf credits that carry triple-A ratings.

"There has been a tremendous demand for high-quality munis," a New York trader said. "You can see some of this in the continued inflows into the municipal bond funds."

There are $3.412 billion of negotiated deals scheduled for the upcoming week versus a revised $4.061 billion in the previous week.

Topping off the negotiated calendar is the New York City Municipal Water Finance Authority's $475 million sale of second resolution, fixed-rate tax-exempt refunding bonds. The authority is one of the managers of New York City's water and wastewater system.

The deal is scheduled to be priced by Citigroup Global Markets on Thursday after a one-day retail order period on Wednesday. The deal will be structured as serials ranging from 2025 to 2032 and will include a 2039 term bond.

The issue is rated Aa2 by Moody's Investors Service, and AA-plus by both Standard & Poor's and Fitch Ratings.

Also on tap is the $200 million Board of Regents of the University of Texas System's Permanent University Fund refunding bonds. The deal is scheduled to be priced by Barclays Capital on Wednesday. The issue is rated triple-A by Moody's, S&P and Fitch.

The University of Texas will refund a portion of its PUF debt with the sale. The PUF backs bonds issued by the University of Texas and Texas A&M University systems, with a portion of the fund distributed to the two systems annually. The fund covers about $2.8 billion of debt.

Also scheduled to come to market is Scottsdale, Ariz.'s $160.415 million of general obligation refunding bonds. The issue, to be structured as serials, will be priced by Wells Fargo Securities on Thursday. The bonds are rated triple-A by Moody's, S&P and Fitch.

Separately, J.P. Morgan Securities is slated to price $116.645 million of revenue bonds for Scottsdale on Wednesday. This issue, which will be structured as serials ranging from 2016 to 2035 is rated triple-A by S&P.

And Bank of America Merrill Lynch is slated to price the Kentucky Higher Education Student Loan Corp.'s $135 million of student loan asset-backed notes on Wednesday.

Bonds slated for competitive sale in the upcoming week total $1.170 billion, compared with $1.621 billion in the previous week.

Fairfax County, Va., will sell $229.905 million of public improvement bonds in the competitive arena on Wednesday. The issue, which will be structured as serials ranging from 2015 to 2034, is rated triple-A by Moody's, S&P and Fitch. Public Financial Management is the financial advisor on the sale.

Fairfax County last sold bonds on Oct. 21, 2014. Citigroup Global Markets won the $208.545 million public improvement bonds with a TIC of 1.9075%.

"Fairfax has always been a good name," the Virginia trader said. "I expect it will trade exceptionally well."

On Tuesday, New Mexico will competitively sell $150 million of unlimited tax general obligation capital projects bonds. The issue, which is rated triple-A by Moody's, will be structured as serials from 2016 to 2025. Fiscal Strategies is the financial advisor on the sale.

New Mexico is not often in the market and has not sold bonds competitively since March 19, 2013. That sale of $137.22 million GOs was won by William Blair with a true interest cost of 1.8019%.

Richard Williamson and Paul Burton contributed to this report.

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