More than $6 billion of long-term new issuance is expected to arrive in the primary market this week, led by a $1.1 billion New York State Dormitory Authority financing that should be highly sought-after by supply hungry investors, municipal traders said on Friday.
Traders reported a quiet trading day on Friday as much of the market started their Columbus Day holiday early ahead of an estimated $6.34 billion of volume slated by Ipreo LLC and The Bond Buyer to be priced this week.
"Sometimes the market needs some supply to get new money involved," said a municipal trader at a large Wall Street firm on Friday. "Big deals get people involved and introduce a little bit of relative value back into the market."
He added that many of the recent large deals gave the market some stability and helped spreads tighten, and he expects this week's slate to do the same.
"Big deals are getting a lot of attention," he said.
Strong demand has fueled new deals in the primary market recently, and that should continue next week, municipal sources said. Inflows into municipal mutual funds, which more than tripled to $762.2 million for the week ending Oct. 8, demonstrate improved support from investors. Last week, a revised $4.87 billion was reported by Thomson Reuters, compared with $5.5 billion that was originally expected.
The largest deal of the coming week will hail from New York where the Dormitory Authority will issue a two-pronged offering of state sales tax revenue bonds that consists of $963.5 million of tax-exempt serial and term bonds in Series 2014A and $36.5 million of federally taxable bonds serial bonds in Series 2014B.
Bank of America Merrill Lynch & Co. will senior-manage the negotiated deal with Jefferies and Ramirez & Co. and will price the offering on Wednesday after a retail order period on Tuesday.
The bonds are rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's, and proceeds will finance capital projects.
In one of the other large deals of the week, the South Carolina Public Service Authority will issue $550 million of Santee Cooper revenue obligations in a negotiated deal scheduled for pricing on Wednesday by B of A Merrill and Barclays Capital.
Rated A1 by Moody's, AA-minus by Standard & Poor's, and AA-plus by Fitch Ratings, the bonds will come to market in two series -- $520 million of tax-exempt refunding bonds structured as serials and term bonds in Series C and $30 million of taxable refunding bonds structured as serial bonds in Series D.
The deal's from the Southeast, which has been relatively absent from the market lately, should appeal to yield-hungry investors, the New York trader said.
"In a specialty state where there has not been a lot of supply away from a state GO, here is a chance for a specialty state to get some yield," he said. "It should be a food fight."
Proceeds are expected to retire commercial paper notes, as well as a portion of outstanding debt of the authority.
In the competitive market, Washington will issue two series of general obligation bonds on Wednesday totaling $765.2 million. The deal consists of $526.60 million and $238.60 million series, both rated Aa1 by Moody's and AA-plus by the two other major rating agencies.
In the negotiated market, the Miami-Dade County, Fla., School Board will issue $288.38 million of certificates of participation on Thursday when JPMorgan Securities prices the deal with an all-serial structure maturing from 2017 to 2031.
The certificates are rated A1 by Moody's and A by Standard & Poor's.
A $253.97 million sale of revenue debt from the California State Public Works Board is planned for pricing on Thursday by Barclays Capital Inc., following a retail order period on Wednesday.
The three-pronged offering is rated A1 by Moody's and A-minus by the other two major rating agencies and is comprised of $110.30 million of lease revenue bonds to finance Department of Corrections and Rehabilitation projects at various correctional facilities; $78.41 million of lease revenue bonds to finance various capital projects, and $65.25 million of lease revenue refunding bonds to refund debt on behalf of the Department of Corrections' Pleasant Valley State Prison project.
Hamilton County, Ohio, is slated to issue $213.71 million of sewer system refunding revenue bonds on behalf of the Metropolitan Sewer District of Greater Cincinnati.
The two-pronged sale, slated for pricing by Morgan Stanley & Co. on Wednesday, consists of $159.97 million in Series 2014 A maturing serially from 2017 to 2031 and a yet to be determined term bond, as well as $53.74 million in Series 2015 A maturing from 2015 to 2019.
The bonds are rated Aa2 by Moody's and AA-plus by Standard & Poor's.
