On the heels of the minor weakness that crept into both the short and long ends of the municipal market late last week and the glut of new supply that investors digested, this week's primary market again calls for a generous slate of new issues that will continue to test buyers' appetites.
The municipal market Friday began to improve, remaining flat to two basis points firmer on the long-end after a recently unattractive ratio of municipals to Treasuries contributed to yields rising between one and eight basis points on Thursday. The generic triple-A general obligation scale in 2039 ended at 4.73% at the close of trading on Friday, according to Municipal Market Data.
This week, issuers expect to price an estimated $7.73 billion in total competitive and negotiated volume, according to Ipreo LLC and The Bond Buyer. Last week, according to Thomson Reuters, a revised $5.35 billion came to market, led the $4.11 billion Puerto Rico Sales Tax Financing Corp. sale.
The final 2044 maturity in the $2.93 billion Series 2009 current-interest portion of the Puerto Rico deal had a 61/2% coupon and 6.10% yield Â–134 basis points higher than the generic, triple-A GO scale in 2039 published by MMD at the time of the pricing by Citi and Barclays Capital Thursday. The Puerto Rico paper was rated A2 by Moody's Investors Service, A-plus by Standard & Poor's and A by Fitch Ratings.
This week's activity will be anchored by a $1 billion sales tax revenue offering from Dallas Area Rapid Transit being priced by senior book-runner Siebert, Branford Shank & Co. tomorrow.
The firm will take indications of interest today on the $750 million series of taxable, direct-payment Build America Bonds, which are structured as term bonds to mature in 2034 and 2044. There will also be a $250 million tax-exempt portion maturing serially from 2014 to 2025.
The deal should be well-received by investors who are fond of the authority's strong reputation, as well as the quality and availability of its BABs, according to Sherman Swanson, managing director of trading and underwriting at Siebert.
"There has been a big calendar lately, but this is a good credit and people are looking for it," he said. "Spreads have been coming in as there have been more of these BAB deals priced, and hopefully DART can take advantage of that," Swanson added.
The deal is rated Aa3 by Moody's and has a natural triple-A rating from Standard & Poor's.
Besides the DART deal in Texas, transportation-related issues are expected to surface in other states, including a $750 million sale of taxable consolidated revenue bonds from the Port Authority of New York and New Jersey.
The deal, which is being priced by Citi on Thursday, consists of three term bonds maturing in 2019 and totaling $150 million, in 2024 and totaling $250 million, and in 2029 totaling $350 million, and is rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch. The structure of the deal was not available at press time on Friday, according to an underwriting source at Citi. In addition, the deal does not include any BABs.
Two large airport revenue deals are also expected to land in the transportation market this week led by a $400 million sale of airport system junior subordinate lien revenue bonds from Clark County, Nev.
Although they are termed bonds in the preliminary official statement, the debt is actually a one-year note, which is slated for pricing on Wednesday by Citi, matures in 2010, and is rated MIG-1 by Moody's and SP1-plus by Standard & Poor's.
Meanwhile, in the nation's capitol, a $338.1 million sale of airport system revenue bonds is being anticipated for sale by the Metropolitan Washington Airports Authority through negotiated pricing tomorrow by Piper Jaffray & Co. following a retail order period today. The bonds are structured to mature serially from 2010 to 2029 and in 2034 and 2039 and are rated Aa3 by Moody's, AA-minus by Standard & Poor's, and AA by Fitch.
In the Midwest, the Michigan Department of Transportation is planning to issue $300 million of grant anticipation notes with Merrill Lynch & Co. as the senior book-runner. An underwriting source at the firm on Friday said the sale date and the structure would not be finalized until this week ahead of the sale.
GO and essential service deals are also on tap this week, including a $600 million water and wastewater system revenue sale from Atlanta, which is planned for pricing on Wednesday by JPMorgan following a retail order period tomorrow. The deal is expected to be uninsured and rated Baa1 from Moody's, A from Standard & Poor's, and BBB-plus from Fitch. The structure includes serial bonds maturing from 2010 to 2029 with term bonds in 2023 and 2039.
San Diego will also issue utility debt this week when it sells $325 million of water revenue bonds tomorrow, after a retail order period planned for today by underwriter JPMorgan, which said the structure of the deal was not yet determined at press time on Friday.
Elsewhere, Cook County, Ill., is planning to issue a total of $520 million of GO bonds - approximately $270 million tax-exempt GO refunding debt maturing from 2010 to 2022, and approximately $250 million of taxable GO bonds, designated as direct-pay BABs that mature in 2033.
Loop Capital Markets will price the offering either tomorrow or Wednesday and the deal is expected to be rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.
In the education sector, the New Jersey Economic Development Authority plans a $400 million sale of 2009 A school facilities construction notes today in the competitive market. The notes, which mature in 2010, are rated MIG-1 by Moody's.