A record slate of competitive bond and note sales has been placed on next week's calendar, including billion dollar-plus megadeals from the states of Georgia and Maryland.
At more than over $6 billion, this would be the largest weekly volume of competitive deals ever assembled. The last time competitive sales even came close to hitting this level was during the week of June 7, 2015, when $3.63 billion of deals went out for bid.
There are about $5.40 billion of competitive bonds slated for sale next week along with around $621 million of competitive note sales, according to estimates from Ipreo on Thursday. Dalcomp tallied about $8.81 billion of negotiated bonds and notes on the week's negotiated calendar.
In comparison, $2.06 billion of bonds and notes were sold competitively this week along with around $3.05 billion of negotiated bonds and notes, according to Ipreo.
In a competitive bond sale, the issuer advertises the offering and places it up for bid. In a negotiated sale, the issuer selects underwriters to purchase and resell the bonds.
Fayetteville Public Works Commission, N.C., officials said the issuer was speeding up its competitive bond offering to get ahead of a possible Federal Reserve rate hike. And that may be the case for other issuers as well.
The Federal Open Market Committee meets on June 14-15 and many analysts expect the Fed to raise interest rates at that time. Competitive sales typically give an issuer lower interest rates than negotiated deals because of the nature of the bidding process -- where the underwriter who submits the lowest rate wins the offering.
But not all market experts were convinced that the Fed was the sole motivator for the surge in sales.
"I am sure the June 15 FOMC meeting entered into some timing decisions of issuers, but the pace of borrowing has generally been picking up in any case," Janney Municipal Strategist Alan Schankel told The Bond Buyer. "May volume was ahead of last year's totals for example and we could see June totals surpass June 2015."
Some market participants thought it was more important to see what such a large competitive slate would do to market performance.
"How have munis performed when the competitive calendar has been heavier than usual? Thus far, during 2016, there have seven weeks when the competitive calendar was more than $2 billion," Daniel Berger, Municipal Market Data's Senior Market Strategist, told The Bond Buyer. "There is no discernible difference in the week before this heavier than normal issuance but lately there is a noteworthy negative bias during this week when this issuance is sold. "
He added that this anomaly will have an adverse effect.
"Next week is so unusually large that the bias has to be negative for the balance of this week and throughout the upcoming week," Berger said Thursday. "Why? For muni market participants the focus was on the surge in competitive underwritings scheduled for next week and the capital commitments required to bid on approximately $6 billion in this supply."
On Tuesday, Georgia will competitively sell about $1.37 billion of bonds in five separate offerings. The deals include $382 million of Series 2016C-1 and C-2 general obligation refunding bonds, $362 million of Series 2016A Tranche 1 GOs, $356 million of Series 2016A Tranche 2 GOs, $200 million of Series 2016B taxable GOs, and $68 million of Series 2016D taxable refunding GOs.
On Wednesday, Maryland will sell $1.04 billion of bonds in a single sale. The state will offer State and Local Facilities Loan of 2016, First Series GOs which are rated triple-A by Moody's Investors Service, S&P Global Ratings and Fitch Ratings.
Also on tap, Massachusetts is competitively selling $500 million of bonds next Thursday in two separate sales. The deals consist of Consolidated Loan of 2016 Series E and Series D GOs which are both rated Aa1 by Moody's and AA-plus by S&P.
Other competitive deals of note include Tuesday's sale by Prince George's County, Md., of $177 million of Series 2016A GO consolidated public improvement bonds and Series 2016B GO consolidated public improvement refunding bonds in two separate offerings; Thursday's sale by the South Broward Hospital District, Fla., of $168 million of Series 2016 hospital refunding revenue bonds; Wednesday's sale by Seattle, Wash., of $165 million of Series 2016 drainage and wastewater system improvement and refunding revenue bonds; and Wednesday's sale by Clark County, Nev., of $108 million of Series 2016 highway revenue refunding bonds.
And the Fayetteville PWC will offer about $112 million of Series 2016 revenue bonds on Wednesday.
In the negotiated arena, the preliminary slate is topped by the New York Transportation Development Corp.'s $850 million of special facility revenue refunding AMT bonds for the American Airlines JFK Project and Harris County, Texas' $514 million of toll road senior lien revenue refunding bonds to be priced by Loop Capital Markets.
Also on the negotiated slate are the Greater Chicago Metropolitan Water District's $432 million of Series A, B, C, D, E, F GO green bonds to be priced by Bank of America Merrill Lynch; the District of Columbia's $422 million of Series 2016A GO to be priced by JPMorgan Securities; the Pennsylvania State University's $2349 million of Series 2016B refunding bonds to be priced by Barclays Capital; and the Texas University Board of Regents' $215 million revenue bonds to be priced by Citigroup.
On the short-term negotiated calendar, Wells Fargo Securities is set to price Los Angeles County's $800 million of tax and revenue anticipation notes while Piper Jaffray is slated to price Idaho's $514 million of tax anticipation notes.
"Given continued inflows to mutual funds, I expect demand to be strong for the states selling next week (and Washington later in the month)," Schankel said. "I'd also note there are two high-quality state higher education deals – Penn State and Texas – which should be well received."
