The municipal market will see a small boost in issuance in the coming week even as total volume remains low.
Negotiated sales are set to rise $1.75 billion from $1.10 billion in the past week and competitive sales will climb to $1.01 billion, from $784.8 million, according to data from Ipreo and The Bond Buyer.
The hike in sales will bring potential total volume net week to $2.76 billion, compared with just $1.89 billion of total municipal bond sales last week.
"While it is too early to be extrapolating annual patterns, the shortage of new issues so far in 2014 cannot be ignored," Citi's municipal research said in a note Friday. "Issuance through February 20, 2014 is estimated at $28.5 billion, down more than 30% from the same period in 2013."
Citi labeled next week's $2.76 billion as a "paltry" offering. The low supply could be particularly inconvenient for traders if demand by buyers increases, Dan Heckman, fixed income strategist at US Bank, said in an interview.
"Investor appetite for munis could increase as they do their taxes," Heckman said. "They're getting hit with taxes and they're having discussions with accountants wondering how they can reduce liability for high-income tax bracket individuals, and munis can do that for them. I do not see demand waning,"
Volume this week was kept low in part by a market closure on Monday for President's Day.
The yield on triple-A 10-year bonds as measured by Municipal Market Data was 2.50% on Friday, down two basis points from Feb. 14. The 30-year triple-A bond yield also fell, by three basis points to 3.84%.
When the market did show activity, many traders looked to Puerto Rico bonds. On Tuesday, Puerto Rico's government held a webinar in which it announced its plans to sell around $2.8 billion in tax-exempt general obligation bonds in March. The island's bonds were the fourth-most traded on the week, according to data from Bloomberg.
The upcoming week's deals include two large competitive sale issuances, the first of which will hit the market on Tuesday when the California Department of Water Resources issues $165 million of water system revenue bonds maturing from 2015 to 2035.
The bonds are rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's. Fitch Rating's score was not yet confirmed at press time.
The other large competitive sale will be on Thursday when Delaware issues $225 million of general obligation maturing from 2015 and 2034. The bonds are rated AAA by Moody's.
On Monday, Inland Valley, California's Development Agency Successor Agency will issue $270 million of tax allocation taxable refunding bonds in the negotiated market. The lead manager of the issuance is Barclays Capital and the bonds are rated A- by S&P.
"People are holding onto whatever positions they're happy with," Heckman said. "Most people are sitting on tremendous cash piles and secondary trading is pretty light." Heckman said any sign of a selloff in the market could unleash a flood of cash from buyers.
With just $1.75 billion in deals in the past week, two large negotiated deals took much of the market spotlight.
The New York City Metropolitan Transportation Authority sold $400 million of transportation revenue bonds on Thursday after a Wednesday retail order period. Morgan Stanley led the issuance and the bonds were rated A2 by Moody's and A by Fitch.
A sale of Louisiana state highway improvement revue bonds was priced by Citibank on Wednesday at $201 million with maturities ranging from 2015 to 2034. The bonds are rated Aa3 by Moody's, and AA by S&P and Fitch.
Citi also led a $156 million Georgia Housing and Finance Authority sale of single-family mortgage revenue bonds on Thursday after a retail order period on Wednesday.
