This week will be short on days and, yet again, slight of issuance for the municipal bond market.
Industry calculations hold that muni bonds expected to be sold this week should total $1.89 billion, versus a revised $2.18 billion last week.
But muni market watchers anticipate the Labor Day holiday will bring the summer lull for the market to a close, and that the coming calendars will pick up in September.
Chicago leads all issuers, as Ramirez & Co. is expected to price $271.5 million of second-lien wastewater transmission revenue project bonds for the city.
A closer look at the week’s issuance shows that $506.7 million of competitive offerings are scheduled for sale, compared with a revised $339.9 million last week. Also, $1.38 billion of negotiated deals are slated, versus a revised $1.84 billion last week.
This week’s deals will be pretty well-received, said John Hallacy, municipal research strategist for Bank of America Merrill Lynch. “I don’t think it’ll be too hard to place the paper,” he said. “Demand is still pretty strong, and we still had positive flows. The expectation is the week after is when the supply will build again and get closer to the moving average.”
The Chicago deal should lead all negotiated issues when it arrives on Thursday. The bonds are rated Aa3 by Moody’s Investors Service, A-plus by Standard & Poor’s and AA by Fitch Ratings.
Barclays is expected to price $181.3 million of Illinois Finance Authority revenue bonds for the OSF Healthcare System. The bonds, expected Thursday, are rated A3 by Moody’s and A by Standard & Poor’s and Fitch.
The deal will be a test case for the industry, said Daniel J. Genter, chief executive and investment officers at of RNC Genter Capital Management. For starters, it’s a health care revenue issue, Genter said, presenting a test on the health care side, a sector known to hold higher-than-average risks for investors.
And with Standard & Poor’s downgrade of Illinois on Wednesday, the muni market “will get its first big test of what kind of collateral damage that might do,” he said.
On the competitive side, Orange County, Fla., is expected to auction $100.6 million of sales tax revenue refunding bonds. The bonds, expected Thursday, are rated Aa2 by Moody’s, AA by Standard & Poor’s and AA-plus by Fitch.