Investors better prepare themselves for another strong primary day on Wednesday, with four deals scheduled to come to market during the week with highest estimated new issue volume in three months. Below, your playbook to attack the day.
Primary (listed in order of largest par amount and descending)
- Top deal of the day is the $300.1 million revenue bonds the Pennsylvania Economic Development Financing Authority is selling for the University of Pittsburgh Medical Center. RBC Capital Markets is the managing underwriter on the deal and the bonds are rated Aa3 by Moody's Investors Service, A-plus by Standard & Poor's and AA-minus by Fitch Ratings.
The Pa. Economic Development Financing Authority last issued $125 million revenue bonds for UPMC in October 2013, which JP Morgan priced with yields ranging from 0.19% with a 1.25% coupon in 2014 to 5% with a 5.07% yield in 2043, according to EMMA.
The two-year 2s in 2015 traded at a high of 0.36% to 0.30% on Sept 5, five basis points above to one basis point below MMD triple-A GO scale the day before.
The 10-year 5s in 2023 last traded at 2.76% on June 18, 42 basis points above where the 10-year MMD benchmark was trading the day before.
The 30-year 5s in 2043 last traded at 3.56% on Sept 12, 40 basis points above the 30-year MMD benchmark was trading the day before.
"UPMC [is what we're looking at Wednesday], it will be good for price discovery because we haven't seen large healthcare these days. It's done well in the secondary in the past," a trader in Chicago said.
UPMC faced some legal hurdles last year when former Pittsburgh Mayor Luke Ravenstahl filed a lawsuit challenging UPMC's — Pennsylvania's largest employer — tax-exempt status. The city's current mayor Bill Peduto dropped the suit in July. - Coming in a close second the $270 million Miami-Dade County Expressway Authority toll system revenue and refunding deal is expected to be priced by Citigroup. The bonds earned an A3 rating from Moody's and an A-minus from Fitch.
On Sept 2, the Miami-Dade revenue 5s in 2043s were one of the most actively traded bonds in the secondary, and investors said they like the bonds because they offered some spread, according to The Bond Buyer. - The Virginia Resourced Authority is scheduled to issue $178.99 million clean water state revolving fund revenue bonds. Davenport is the lead manager on the deal and the bonds have triple-A ratings from the three major rating agencies.
- San Francisco is scheduled to issue $156.2 million GO earthquake safety and emergency response bonds in a two-part deal comprised of $55.2 million series 2014C bonds and $101 million Series 2014D bonds. Stifel Nicolaus will price the deal, which is rated Aa1 by Moody's, AA-plus by S&P and AA by Fitch.
"There has not been really any [California credits around], it's a fairly quiet calendar there has been nothing for my retail California clients to buy recently. It's an interesting market because there's nothing for retail but a lot of cash on the sidelines available," said a trader in California. - In the background, Massachusetts' $350 million GO green bonds enter their third and final day of retail orders on Wednesday. Institutional sale is scheduled for Thursday. Morgan Stanley is the lead underwriter and the bonds are rated Aa1 by Moody's, and AA-plus by S&P and Fitch.
All information is according to The Bond Buyer, TM3, Ipreo, and data provided by Interactive Data.
Secondary
After a quiet start to the week traders anticipate activity in the secondary market will pick up after the FOMC forecast, if it gives any indication rates increase sooner than expected, traders said.
Economic News
The Federal Open Market Committee is scheduled to release its forecast at 2 p.m. EST. The pressure is on after the ISM Manufacturing Index shook the market earlier this month, showing the market's susceptibility to economic data during periods when global tensions are not as strong, according to traders. Economic data's impact on the market was further enforced when it stabilized after a disappointing nonfarm payroll number was reported three days later.
- "[The FOMC forecast] is clearly important, and it sounds like, it seems like there's a lot of chatter out there for the potential of a rate increase sooner than expected. People are going to hang on every word," a trader in Chicago said.
- "I'm hoping to see them give a little more guidance for when we may see some changes in rates, the market kind of needs that. But I don't know if we'll hear anything different," said a trader on the west coast.
