The largest bond deal so far in 2012 will lead the way on the heftiest calendar yet this year.
California issuers will drive new issue volume this week. The Golden State should account for almost $2.8 billion on the negotiated docket alone, led by a $2 billion offering of general obligation bonds.
For the week, The Bond Buyer calculated that municipal bonds expected to be sold total $7.21 billion, versus a revised $4.14 billion last week.
There are $1.87 billion of competitive offerings scheduled for sale, compared with a revised $1.06 billion last week. In addition, $5.34 billion of negotiated deals are slated for sale, against a revised $3.07 billion last week.
The past couple of weeks have shown that investors are looking for specific credits. And last week’s upsizing of University of California Regents and New York City deals can only point to a healthy level of demand, despite the higher muni yields on the week in the intermediate and long ends of the curve.
Demand for California munis is sufficient to comfortably absorb the tidal wave of new bond deals coming from issuers in the state, according to Joe Deane, executive vice president and head of munis at PIMCO.
“There’s more than enough capital around to do that,” he said. “We actually are in the opposite position, where we could use more new-issue volume relative to the cash in the system. This is the statistical opposite of where we were one year ago at this time.”
California leads the way in the negotiated market for the week. JPMorgan is expected to price $2 billion of various-purpose GOs. The bonds are rated A1 by Moody’s Investors Service and A-minus by Standard & Poor’s and Fitch Ratings.
There is expected to be a two-day retail order period starting on Tuesday, with institutions free to participate starting on Thursday.
RBC Capital Markets follows as it expects to price $350 million of California Department of Water Resources Central Valley Water Project System revenue bonds in three series. The bonds, which are expected to arrive Tuesday, are rated Aa1 by Moody’s and AAA by Standard and Poor’s.
Morgan Stanley should price $251.2 million of California Health Facilities Financing Authority revenue bonds, Series 2012A and 2012B, for the Lucile Packard Children’s Hospital. The bonds are rated Aa3 by Moody’s and AA by Standard & Poor’s and Fitch. They are expected to arrive on Thursday.
Goldman, Sachs & Co., is expected to price $231 million of Kentucky Turnpike Authority economic development road revenue bonds for revitalization projects. The bonds are rated Aa2 by Moody’s, AA-plus by S&P and AA-minus by Fitch. The bonds are expected to arrive on Wednesday. They should be structured as serials, from 2016 to 2030.
This week should have some larger competitive deals on the calendar. On Thursday, Louisiana is expected to auction $400 million of GOs, Series 2012A.
The bonds are rated AA by Fitch. They’re expected to be structured as serials.
On Tuesday, Washington is expected to auction $346.1 million of various-purpose GOs, Series 2012D. The bonds are rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch. They are expected to be structured as serials.
Also on Tuesday, Washington is expected to auction $188.6 million of motor vehicle fuel-tax GOs, Series 2012E. The bonds are rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch. They are expected to be structured as serials.
Last week’s New York City GO deal, which was upsized after two retail order periods to $950 million from $800 million, was a good bellwether for the market, a trader in New Jersey said. The retail reception alone was promising, he added.
“There are still pockets of demand, particularly for specialty state paper,” the trader said. “And even though the general municipal market, as reflected by the [Municipal Market Data scale], has deteriorated slightly, for certain issuers there’s still a fair amount of demand. And that was reflected in [Thursday’s] New York transaction.”