The market is quiet on Monday as investors prepare themselves for a bombardment of economic data scheduled to come out this week.
The heavyweight releases are expected to start Wednesday when the gross domestic product number is announced in the morning, followed by Federal Open Market Committee meeting minutes in the afternoon. Thursday's jobless claims data and the employment situation report on Friday will also hold the market's attention, according to investors.
"I think the thing to bear in mind is that we have a huge economic calendar this week, people are reluctant to do anything before they find out what the Fed is doing and before payrolls are announced," a trader in Chicago said. "People are apprehensive to do anything before the numbers come out."
A trader in Texas described Monday's activity as "a typical summer Monday," agreed the economic numbers would be key factors in trading decisions this week.
"By far one of the bigger numbers is jobless claims on Thursday, and unemployment on Friday is the largest number people will focus on," he said. "They will drive [the market] and beat the tent on how deals will go into the market."
The Texas trader said Monday trading is quieter than in the past couple weeks because scheduled supply is lower this week. Issuance is predicted to total $4.2 billion this week, down nearly a third from $6 billion last week, according to data provided by The Bond Buyer and Ipreo.
"I think what we saw the last three weeks was a rush to market," he said. "Issuers and underwriters saw that rates were continuing to hold in here, and if they could get a deal out at those levels, they would want to take advantage of the historically low yields."
Demand for munis had remained strong throughout the summer, with municipal funds reporting their highest level of inflows in 11 weeks with $686.2 million last week, according to Lipper FMI.
The headline negotiated deal for the week is the $744.29 million California State University system wide revenue bond offering that Barclays Capital is scheduled to price on Thursday. California ranked second in issuance for the first half of 2014, behind Texas.
While the Golden State has been the top issuers this year it's tapped the market for considerably less debt than in 2013. Volume totaled $19.62 billion as of June 30, down 27.8% from the same period in 2013, according to data provided by The Bond Buyer and Ipreo.
That reduction in supply probably means that the California State University deal will place easily and be bid on aggressively.
"The California State University deal will be an [expletive] show," a second trader in Chicago said. "Translation: that it will get good interest."
The Illinois Sports Facilities Authority also plans to tap the negotiated market with a $285 million deal lead by Barclays Capital. The bonds are rated A by Standard & Poor's.
The deal's pricing may be affected by S&P's recent revision of its outlook on the state's A-minus rating to negative, citing the state’s budged and pension reform viability as causes for concern.
"It's a tax-supported sports facilities refundings," the trader said. "Because its tax supported there may be a spillover effect from the [Illinois] ratings downgrade, this may be an interesting one to watch."
Spreads widened not only for the state of Illinois' GO last week, but also larger issuers in the state including the City of Chicago and the Chicago Board of Education, as previously reported.
San Antonio will also issue $36.95 million of general improvement and refunding bonds led by Piper Jaffray. This deal is rated AAA by Fitch.
The competitive calendar next week is expected to remain light, with only one deal over $100 million scheduled to price. The city of Suffolk, Virginia, plans to sell $124.745 million of general obligation bonds on Wednesday.
The deal is serialized, with maturities ranging from 2015 to 2042. S&P has the deal rated AAA, while Fitch Ratings rated it AA+. Moody's Investors Service rated the deal Aa1.
Use of proceeds will go toward various capital improvement projects, as well as retire some of the issuer's outstanding debt. The issuance will raise the city's debt load to $361.4 million.
