Volume Forecast to Rise to 3-Month High as Airport Deal Leads $6.02B Slate

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A $481 million San Francisco Airport Commission sale will lead the activity in the primary market this week as part of an estimated $6 billion of new-issue volume - the highest estimated volume in almost three months.

The last time volume was predicted to be higher than this week's was the week of June 23 when Ipreo LLC and The Bond Buyer calculated that $8.9 billion of new issue supply would arrive in the primary market. Actual volume for that week was later revised to $7.6 billion as reported by Thomson Reuters.

This week, a $6.02 billion is expected to arrive, according to Ipreo and The Bond Buyer, versus last week's revised $3.46 billion as reported by Thomson Reuters. Overall volume has declined 15.3% year to date as of July 31 compared with the same period in 2013, according to   The Bond Buyer and Ipreo.

The San Francisco airport sale, set for Tuesday, is the week's largest deal. JPMorgan Securities LLC will price the revenue offering on behalf of the San Francisco International Airport.

The structure includes serial bonds maturing from 2029 to 2034 and a 2044 term bond in the larger series, with an additional series consisting of a single 2044 term bond. All are rated A1 by Moody's Investors Service, and A-plus by Standard & Poor's and Fitch Ratings.

Several deals are expected to arrive in the Northeast market, led by a $350 million sale of Massachusetts general obligation bonds for environmental projects ranging from clean water and drinking water, conservation, and habitat restoration to the New Bedford Marine Commerce Terminal, the nation's first facility dedicated to offshore wind projects.

Morgan Stanley & Co. is expected to price what will be the state's second offering of so-called "green bonds" on Thursday, following a three-day retail order period. Its 2013 green bond sale was the first of its kind in the municipal market. The bonds are rated Aa1 by Moody's and AA-plus by both Standard & Poor's and Fitch.

The Pennsylvania Economic Development Financing Authority will issue $300 million of revenue bonds on behalf of the University of Pittsburgh Medical Center, in a negotiated deal led by RBC Capital Markets and scheduled for pricing on Wednesday.

Rated Aa3 by Moody's, A-plus by Standard & Poor's, and AA-minus by Fitch, the bonds are structured with serial bonds.

A $225 million revenue refunding from the New York City Municipal Water Finance Authority should garner strong demand from both individual and institutional investors due to its structure and timing.

The deal consists of three term bonds maturing in 2028, 2029, and 2036, which should have wide appeal because of a lack of short paper from authority, according to Howard Mackey, vice chairman of Rice Financial Products, which is senior-managing the deal.

"There have not been many short bonds inside of 15 years in city waters for some time," Mackey said, indicating that there is "fairly strong" demand for the water and sewer system second general resolution revenue bonds.

Last Wednesday, the authority priced $200 million of water and sewer system second general resolution bonds, an offering that included one term bond in 2045, which is callable in 2024 at par. The competitive sale was won by Bank of America Merrill at a true interest cost of 3.9923%, with a 4% coupon.

Mackey expects generous institutional demand for the 2036 longest maturity "because of the quality of the name."

"We do have a fair amount of buying interest at this time," he said on Friday, ahead of Monday's retail order period and Tuesday's official pricing for institutions. The bonds are rated Aa2 by Moody's and AA-plus by Standard & Poor's and Fitch.

Overall, Mackey said although the market has been up and down lately, large new deals are moving.

"It's more a function of demand," he said. "You have a lack of supply, which is obviously helpful to us at this point."

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