A $300 million Illinois revenue offering will lead the activity in the primary market this week as part of an estimated $4.97 billion in new volume, which is on the lighter side due to the absence of large, billion-dollar deals that have dominated the calendar in recent weeks.
The Bond Buyer and Ipreo LLC project volume will decline from a revised $5.52 billion that actually came to market last week, according Thomson Reuters, when the largest deal was a $1.2 billion financing from the Iowa Financing Authority for the construction of a new nitrogen fertilizer plant in the state.
Volume has dwindled in the last two weeks after rising as high as $7.53 billion in the week of April 8.
On Friday the Municipal Market Data benchmark, triple-A general obligation bond in 2043 ended at a 2.82%, after the Labor Department released better-than-expected employment numbers. Non-farm payrolls increased 165,000 in April and the jobless rate fell 0.1 percentage point to 7.5%.
Despite the lull in issuance last week, traders on Thursday reported an overall strong tone as tax-exempt yields fell by a basis point or two on the front end of the curve and the MMD benchmark, triple-A GO in 2043 held steady at a 2.79%.
“The chance that supply begins to slow into the summer is also helping dealers step up their bidding,” wrote MMD analyst Domenic Vonella in a daily market commentary. “However, customer follow through was extremely limited Thursday.”
The lull is expected to continue this week, although investors will see some fresh or slightly higher-yielding names making an appearance.
The taxable offering of Build Illinois sales tax revenue-backed bond sale will mark the financially-troubled state’s first revenue bond offering in a year. The deal will arrive in the competitive market on Thursday, the state’s second appearance this year. It made an April 2 trip to the competitive market with $450 million of tax-exempt GOs and $350 million of taxable general obligation bonds.
Its newest sale will be structured with serial bonds maturing from 2013 to 2037 and will be rated A2 by Moody’s Investors Service, AAA by Standard & Poor’s, and AA-plus by Fitch Ratings.
Its deal’s timing also coincides with another sale this week from an Illinois issuer.
The Illinois Finance Authority will sell $152.36 million of revenue bonds on behalf of the University of Chicago in a Morgan Stanley-led negotiated deal planned for Tuesday and expected to be rated Aa1 by Moody’s, AA by Standard & Poor’s, and AA-plus by Fitch.
Illinois’ sales tax revenues are rebounding as the state faces $9 billion in overdue bills. On Thursday its House of Representatives voted 62 to 51 in favor of a comprehensive bill aimed at fixing its unfunded public pension system, which is facing a $96.8 billion shortfall.
Illinois was also among the 44 out of 50 states whose tax revenues for the fourth quarter 2012 rose 5.2% on average year over year, according to U.S. Census Bureau data released in March. The state’s revenue growth was near the average. In other competitive deals this week, Louisiana will head to market with a two-pronged sale of GO debt on Tuesday, consisting of $169 million of taxable serial bonds maturing from 2014 to 2026, and $130 million of serial bonds maturing from 2014 to 2033 -- both rated Aa2 by Moody’s, and AA by Standard & Poor’s and Fitch.
Colorado’s Regional Transportation District is also gearing up to sell $202.28 million of sales tax refunding bonds originally sold to finance the FasTracks rail and bus transit project. The bonds, which are expected to be rated Aa2 by Moody’s, AA-plus by Standard & Poor’s, and AA by Fitch, will be priced by Morgan Stanley on Wednesday.