The municipal market this week will again see a generous slate of new issues, led by $800 million of personal income tax revenue bonds from the Dormitory Authority of the State of New York in the long-term market and $500 million of Idaho tax anticipation notes in the short-term market.
An estimated $7.85 billion is expected - $6.76 billion of negotiated deals and $1.08 billion of competitive offerings, according to Ipreo LLC and The Bond Buyer. That comes on the heels of a revised total of $6.91 billion of negotiated and competitive deals last week and several recent heavy-supply weeks, according to Thomson Reuters.
The Dormitory Authority will kick off the brisk activity expected in the Northeast when it issues the PIT bonds on Wednesday, following a retail order period tomorrow by senior manager JPMorgan.
The deal will consist of $587 million of Series 2009A new-money bonds, $198.7 million of Series 2009B tax-exempt refunding bonds, and $10 million of Series 2009C federally taxable refunding bonds.
The bonds are structured to mature from 2010 to 2039 and are expected to have a natural AAA from Standard & Poor's and a AA-minus from Fitch Ratings. Series 2009B and Series 2009C will currently refund certain outstanding variable-rate mental health services facilities improvement revenue bonds previously issued by the authority, according to the preliminary official statement.
The Massachusetts Educational Financing Authority will sell $290.7 million of education loan revenue bonds in a negotiated deal that is expected to be priced by Morgan Stanley on Wednesday after a retail order period tomorrow. The structure of the deal was not available at press time on Friday.
The Pennsylvania Turnpike Commission will round out the region's activity with a $277.4 million Turnpike revenue bond sale tomorrow. The offering consists of taxable direct-pay Build America Bonds that are rated Aa3 by Moody's Investors Service and A-plus by Standard & Poor's. Senior manager Barclays Capital will price the offering with a single term bond expected to mature in 2039.
One of the week's largest deals will take place in the short-term market tomorrow when Idaho issues its one-year Tan sale through senior manager Seattle-Northwest Securities Corp. The notes are rated MIG-1 by Moody's, SP1-plus by Standard & Poor's, and F1-plus by Fitch and mature in 2010.
In other activity, the Port of Seattle will sell $310.2 million of revenue bonds in a deal slated for pricing on Thursday by Barclays. Rated Aa2 by Moody's, AA-minus by Standard & Poor's, and AA by Fitch, the bonds are structured to include serial and term bonds, as well as capital appreciation bonds, though the exact maturities were not available at press time on Friday.
A $250 million sale of natural triple-A-rated revenue bonds is on tap Thursday from the University of Texas Board of Regents. JPMorgan will price the deal after conducting a retail order period on Wednesday. The deal structured with serial bonds that mature from 2010 to 2026.
In California, a two-pronged deal from the Tuolumne Wind Project Authority is being planned for pricing by Citi on Wednesday, following a retail order period tomorrow. Approximately $220 million will consist of tax-exempt revenue debt that matures in 2013 and 2034, while $210.8 million of taxable direct-pay BABs have a term maturity, though the details were not available at press time.
The Los Angeles Harbor Department plans to sell $200 million of new-money bonds and up to $550 million of refunding debt to be priced by JPMorgan. A retail order period is planned for Wednesday with the official pricing for institutions on Thursday.
The new-money bonds are structured as 30-year, fixed-rate bonds. The port has issued an optional tender notice for $550 million of bonds that pay interest subject to the federal alternative minimum tax in order to refund them as fully tax-exempt bonds under the American Recovery and Reinvestment Act.
The stimulus act exempted all tax-exempt bonds issued in 2009 and 2010 from the AMT and allowed issuers to refund AMT debt issued within the last five years. Since AMT bonds can't be advance refunded, the Harbor Department is using optional tenders to buy the 2005 and 2006 bonds from investors.
Both the new-money and refunding bonds are backed by port revenues. The bonds are rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.
Meanwhile, investors hoping to uncover more yield than is currently available in the plain-vanilla market will take notice of two deals with triple-B ratings anticipated for pricing this week - $350 million from the Puerto Rico Building Authority on Thursday and $250 million from the Virgin Islands Public Finance Authority tomorrow.
The Puerto Rico authority is planning to issue $300 million of refunding bonds and remarket $50 million of auction-rate bonds in order to convert the debt to a fixed rate. Merrill Lynch & Co. will price the deal, which is rated Baa3 by Moody's and BBB-minus by Standard & Poor's.
The Virgin Islands authority, meanwhile, is tentatively planning to issue subordinate revenue bonds today in a JPMorgan-led deal structured to mature from 2013 to 2037 and rated Baa2 by Moody's and BBB by Fitch. However, on Friday the firm said the timing of the deal was tentative and could get delayed due to all the supply in the market this week.
Investors could earn significantly more from triple-B bonds in the current market. Last Thursday, for instance, triple-B rated revenue bonds due in 2037 were yielding 6.76%, according to the sector curve published by Municipal Market Data, at a time when the generic triple-A general obligation curve in 2037 was yielding 4.68%.