A $1.1 billion Texas Transportation Commission revenue offering and a $700 million New York City general obligation sale this week will pump some life into the lackluster new-issue market.
Ipreo LLC and The Bond Buyer estimated that long-term volume will increase to an estimated $5.27 billion this week. Last week issuance came to just $2.49 billion, compared with the $2.76 billion that was originally expected, according to Thomson Reuters.
"The market feels good," said a New York-based trader ahead of the two largest upcoming deals on Friday, as the generic, triple-A GO scale in 2044 ended down 12 basis points at 3.72% after starting the week at 3.84% last Monday, according to Municipal Market Data.
Municipals outperformed Treasuries on Friday as the lack of new bonds held yields at low levels.
The Texas and New York bonds should get some keen attention from investors, but "it's a function of price," another New York trader said. Demand has been solid, he said, and the market has been relatively steady to stronger lately.
"We take the volume -- or lack thereof -- in stride," he added.
The market seemed to have a positive response to the supply slump on Friday at the close of trading when yields on municipal bonds were unchanged or declined by as much as three basis points between one and four years, while they were unchanged between 2019 and 2039, and one basis point lower between 2040 and 2044, according to MMD. Friday morning, the benchmark 10-year Treasury yield gained three basis points, while the 30-year climbed two basis points.
"Stronger-than-expected data caused Treasuries to flounder and helped stocks rally," Thomson Reuters analyst Randy Smolik wrote in a post on Friday afternoon. "For munis, most of the serial range trading seemed mixed but mostly steady."
In new issue pricing this week, the Texas deal is expected to arrive in two series on Thursday, both rated triple-A by Moody's Investors Service and Standard & Poor's.
The larger series consists of $891 million of state highway fund revenue refunding bonds, while the smaller series will include $300 million of state highway fund revenue bonds. The deal will be priced by Piper Jaffray.
The New York City deal will be priced by Citi on Wednesday after a two-day retail order period. Structured to mature from 2016 to 2039, the bonds are rated Aa2 by Moody's and AA by Standard & Poor's.
Maryland will add to the Northeast activity this week as it gears up to price a three-pronged GO sale on Wednesday in the competitive market. A $450 million series will consist of GO bonds maturing from 2018 to 2029, while a $241 million series of GO refunding bonds will mature from 2014 to 2021. An additional $50 million series of taxable GO bonds is set to mature in 2017 and 2018.
The Maryland GOs are rated triple-A by all three major rating agencies and the proceeds will be used to finance state and local facilities projects.
Missouri will sell $200 million of health facilities revenue bonds on behalf of the B JC Health System in an RBC-led deal on Thursday. The bonds are rated Aa2 by Moodys and AA by Standard & Poor's. The structure was still being hammered out at press time.
Smolik said March volume is building, with some $1 billion deals in the pipeline, and noted that this week's estimated supply is close to the 2013 weekly average.
