Volume will dip considerably low this week as issuers are expected to pare back financings to roughly a third of the early Christmas bonanza they delivered last week.
"Two weeks ago it started out being all about supply, and it ended up being all about oil, the stock market, and Treasury yields — you had a pretty good move the last two weeks that helped us chew through the supply," said a New York trader.
An estimated $3.73 billion is expected to arrive into the primary market this week, according to Ipreo LLC and The Bond Buyer, led by a $464 million sale of personal income tax revenue bonds from the Dormitory of the State of New York. That deal is expected to price on Tuesday.
The decreased volume pales in comparison to the revised $12.97 billion that thundered into the new-issue market last week — noticeably above the $11.80 billion that was originally estimated — and the second in as many weeks where volume temporarily catapulted above the recent weekly norms.
Volume also rose to a revised $12.82 billion in the week ended Dec. 1.
"I think for as concerned as our market was about the two-week supply bulge, we got through it and Treasuries helped us," the trader said.
"Obviously it will get spotty as people close down for the year," he said on Friday afternoon.
He said next week's curtailed volume should be manageable if Treasuries stay in the current range with the 10-year bond hovering around 2.11% as of Friday afternoon, after ending at an 18-month low in the prior trading session at 2.17%, according to Municipal Market Data.
"The general perception is Treasuries will do better and that will help the relative value of our market, and that will dovetail into when people start "taking a holiday" in the next week or two, the trader added.
Back to this week, the New York dormitory deal will be priced by Bank of America Merrill Lynch & Co. on Tuesday following a retail order period on Monday.
The bonds are rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's.
The Northeast will also see the arrival of a $235 million New York City Housing Development Corporation offering of multi-family rental housing revenue bonds in a Morgan Stanley & Co.- led planned for pricing on Tuesday.
The deal, which is rated AAA by Moody's, is structured with serial and term bonds and will consist of $230 million of Series A-1 bonds not subject to the alternative minimum tax, and $5 million of Series A-2 taxable bonds.
In another sizeable deal this week, the Arizona Transportation Board will sell $380 million of highway revenue refunding bonds on Tuesday in a deal senior-managed by Citigroup Global Markets.
The deal is structured to mature serially from 2015 to 2017, and from 2023 to 2033 and is rated Aa1 by Moody's and AAA by Standard & Poor's.
Turning to the Midwest, the Metropolitan Water Reclamation District of Greater Chicago is prepping its $296.43 million sale of unlimited tax capital improvement general obligation bonds.
The deal garnered triple-A ratings from Standard & Poor's and Fitch Ratings and includes new money and refunding green bonds.
One of the only other somewhat sizeable deals this week is a $229 million sale from the Los Angeles Department of Water and Power planned for official pricing on Tuesday by Siebert Brandford Shank & Co. on the heels of a retail order period on Monday.
The bonds are rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch.
