After a short-lived supply boost last week, volume will drop by an estimated $5 billion this week as issuers scale back financings and underwriters and investors head into the Fourth of July holiday.
The first half of 2014 will officially come to an end this week with issuance decreasing to $2.01 billion, according to Ipreo LLC and The Bond Buyer, down from a revised $7.6 billion in the prior week as reported by Thomson Reuters.
The two largest competitive deals that will dominate the primary market this week include a $554.52 million Alabama Public School & College Authority capital improvement refunding and a $450 million Massachusetts general obligation bond sale - both scheduled to kick off the third quarter on Tuesday.
Market participants said demand should remain high for these and other deals in coming weeks - despite the recent overall low supply and yields in the municipal market lately.
"Miller Tabak Asset Management sees a sideways trading environment in the coming days as low supply keeps selling pressure at a minimum," said the New York City-based firm's chief executive officer Michael Pietronico on Friday.
"Confusion over the trajectory of the U.S. economy given the harsh pullback in economic activity during the first quarter of 2014 is likely to keep interest in fixed-income high even as yields remain historically very low," he added.
Inflows for all municipal bond funds rose to $233.5 million for the week ending July 18, from $147.7 million last week, according to Lipper FMI, while outflows among municipal money market funds slowed to less than a million dollars in the week ended June 23, after $1.2 billion of outflows last week as reported by iMoneyNet.com.
The municipal market strengthened late last week in the midst of negative rating news affecting some of Puerto Rico's key issuers. Yields on bonds maturing in three to eight years fell as much as two basis points; nine to 29 years slipped as much as one basis point, while short term yields remained steady, according to the Municipal Market Data's triple-A scale.
The scale in 2044 declined by nine basis points to 3.29% as of last Thursday, compared to where it began last Monday, according to MMD.
Issuers of negotiated activity this week hope that strength continues when they price respective deals this week, including a $322.12 million refunding of gas supply revenue bonds from the Lancaster Port Authority, as well as a pair of Texas deals.
RBC Capital Markets will price the Lancaster deal on Tuesday with a serial structure maturing from 2014 to 2019 and a Aa3 Moody's rating.
In addition, JPMorgan Securities will price a $333 million Dallas Independent School District unlimited tax refunding issue also on Tuesday with an all-serial structure that matures from 2014 to 2034. The bonds are rated triple-A by Moody's and Standard & Poor's by virtue of being backed by the state's Permanent School Fund.
Elsewhere in Texas, the Houston Higher Education Finance Corporation is preparing to sell $101.1 million of education revenue and refunding bonds in a negotiated deal priced by Raymond James & Associates on Tuesday.
Structured with serial bonds from 2015 to 2034 and term bonds in 2038 and 2044, the deal is also backed by the Texas PSF guaranty.
Other deals planned this week include a $200 million Los Angeles Department of Water and Power revenue bond sale slated for pricing by Wells Fargo Securities on Tuesday with a structure of serial bonds maturing from 2020 to 2029 and a term maturity in 2017.
The bonds are rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch Ratings.
