Houston's $527.5 million combined utility system bonds are more in demand than the $1.7 billion Los Angeles Unified School District general obligation refunding bonds also scheduled to price this week, according to market participants.
Investors said the Houston deal is more attractive because it is a utility deal and because there is a lot of Los Angeles paper in the market.
"Houston will do better than the L.A. deal, I think," a trader in New York said. "If had choice to buy L.A. or Houston, I would jump on Houston, especially the utility system in Houston."
Goldman, Sachs is expected to price the Houston utility system deal Wednesday. It earned AA ratings from Standard & Poor's and Fitch Ratings.
"I think the old buyer will look at the education bond and be like 'Great, they're funding education, that's wonderful', but new [buyers] are saying 'Education bonds are not what they were, I'm going to stay with my utility bonds'," the trader in New York said.
Investors have said the market is starved for utility paper. Utility issuance as of May 31 totaled $9.85 billion, down 35.5% from the $15.27 billion issued during the same period in 2014, according to The Bond Buyer and Ipreo data.
"It's possible people might choose Houston over L.A.," a trader in Chicago said. "The L.A. USD name comes to market all the time, talk about a target name. There is a lot of California paper out there, so it depends on the level it comes, it's a headline name in California so folks will have to participate."
Just last week Los Angeles County sold $900 million tax and revenue anticipation notes.
J.P. Morgan Securities is expected to price the Los Angeles Unified School District GOs on Thursday. The bonds received an Aa2 rating from Moody's Investors Service, and AA-minus from S&P.
Morgan Stanley will price $765 million of New York City GOs on Wednesday. A retail order period was held on Monday and Tuesday. The deal is rated Aa2 by Moody's and AA by both Standard and Poor's and Fitch.
Bank of America Merrill Lynch will price $279.1 million of California Health Facilities Financing Authority Providence Health and services bonds. The deal is rated Aa3 by Moody's and AA by Fitch.
Citigroup Global Markets will bring to market $170.6 million of Fairfax County, Va., facilities revenue bonds. A retail order period was held on Tuesday. The deal is rated Aa1 by Moody's and AA-plus by S&P.
BMO Capital Markets will issue $186.5 million of Wyandotte County, Kan., Unified Government board of public utilities improvement and refunding revenue bonds. The bonds mature serially from 2014 to 2034 with term bonds in 2039 and 2044. The deal is rated A3 by Moody's and A-plus by both S&P and Fitch.
JP Morgan Securities will issue a three-part deal totaling $149.4 million of Massachusetts Housing Finance Agency housing bonds. The deal is rated Aa3 by Moody's and AA-minus by both S&P and Fitch.
Wells Fargo Securities will price $130 million of Regional Transportation Authority of Pima County, Ariz., tax revenue bonds. The bonds mature serially from 2015 to 2026 and are rated AA-plus by S&P and AA by Fitch.
Morgan Stanley will bring to market $111.9 million of Clear Creek Independent School District, Texas, unlimited tax school building and refunding bonds. The deal is rated AA-plus by Fitch.
In the competitive market, the Maryland Department of Transportation is expected to auction $100 million of consolidated transportation bonds. The deal is rated Aa1 by Moody's, AAA by S&P and AA-plus by Fitch.
Municipal bond yields opened steady on Wednesday for bonds maturing in nine to 30 years, according to Municipal Market Data. Yields for one- to eight-year maturities held steady.
Treasuries strengthened across the curve Wednesday morning. The 30-year yield, the 10-year benchmark yield and the two-year note fell to 3.46%, 2.63% and 0.43%, respectively.
