Though municipal yields are rising across the curve from September’s record lows, issuers are bringing more debt to market. A total of $6.68 billion is expected in the primary this week, up from last week’s revised $4.49 billion.
The higher issuance this week comes after many deals saw concessions last week.
“Last week was not only sizeable, but the number of issues was numerous,” said Randy Smolik, analyst at Municipal Market Data. “That combination encourages underwriters to put a lot of concession on deals to compete for customer attention.”
Even though offerings that came to market last week offered concessions, they were still fairly well-received. Bank of America Merrill Lynch, which priced triple-A rated New York City Transitional Finance Authority bonds, cut prices between five and 10 basis points, but was able to increase the deal size to $757 million from $509 million.
This week, the muni market can expect $4.89 billion in negotiated issues, up from last week’s revised $3.64 billion. The competitive market can see $1.79 billion, more than double last week’s revised $844.7 million.
Muni yields moved higher following Treasuries, but still, “yields are low enough,” according to Howard Cure, head of municipal research at Evercore Wealth Management.
“For a lot of places, current refundings still work,” he said. “Ten years ago issue levels were getting really high, so current refundings are in the market now.”
Cure added that many of the top deals this week have refunding components.
In the negotiated market, California is aiming to offer over $2 billion in three parts.
The state will issue $1.8 billion of tax-exempt various-purpose general obligation bonds Tuesday, followed by $200 million of taxable various-purpose GO bonds, and $132.9 million of remarketing Build America Bond GOs.
The lead underwriters are Goldman, Sachs & Co. and JPMorgan. The bonds are rated A1 by Moody’s Investors Service and A-minus by Standard & Poor’s and Fitch Ratings.
New York City’s Hudson Yards Infrastructure Corp. is issuing $1 billion of fiscal 2012 Series A senior revenue bonds.
The lead book-runner on the deal is JPMorgan. The bonds are rated A2 by Moody’s and A by Standard & Poor’s and Fitch.
“Hudson Yards is a deal that is not as interest-rate sensitive,” Cure said. “This is a project where the city wants it completed and it’s their good fortune to have to issue debt to complete a project when rates are so low.”
The remaining deals in the negotiated market are smaller, with only six above $100 million, including a $172 million hospital facilities revenue refunding and improvement bond offering by Gallia County, Ohio, in two series. The larger series will be $171.2 million of tax-exempt bonds followed by $1.5 million of taxable debt. RBC Capital Markets is the lead underwriter.
The Jefferson Parish Finance Authority in Louisiana will issue $170 million of hospital revenue and refunding bonds. The lead manager is JPMorgan. The bonds are rated Baa2 by Moody’s and BBB-minus by Standard & Poor’s.
On the competitive calendar, Pennsylvania will issue $825.77 million of GOs, and the Virginia College Building Authority will sell $154.3 million of revenue bonds. Both deals are slated to price Tuesday.