Summer doldrums will hit the municipal market next week as traders prepare for a week of light issuance in the primary.
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. Demand for munis still remains 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 next week is the $744.29 million California State University system wide revenue bonds Barclays Capital is scheduled to price on Thursday. California has been one of the top issuances for the first half of 2014, coming in second for states selling the most volume right behind Texas.
While the Golden State has been one of the issuers this year it's tapped the market for considerably less debt than in 2013. Volume will total just $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 lack of supply promises 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 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 sports facility deal lead by Barclays Capital. The deal is 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 general improvement and refunding bonds lead 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.
