DALLAS — Texas debt issuance drops dramatically this week as the bond industry looks toward a holiday respite.
As of Friday, the only issues listed were in the $10 million range or less.
“That’s normal,” said Jeffrey Timlin, portfolio manager for Sage Advisory Services in Austin. “People are focused on the holiday season. The market makers will be taking off and trading desks will be staffed mostly by junior executives.”
But Timlin made it clear that the holiday slowdown was about the only thing normal about the municipal market in 2008.
“This has been a historic year by any stretch of the imagination,” he said. “If you told someone in early 2007 that the municipal bond insurance industry would be non-viable, that auction-rate securities would go belly-up, that investment banks like Lehman Brothers and Bear Stearns would disappear, you would probably have been locked up in the loony bin. You’ve seen this multitude of factors that hasn’t occurred pretty much in the history of the market.”
Despite the unprecedented turmoil, two large Texas deals did get done last week.
San Antonio on Friday managed to price $158 million of refunding bonds for its CPS Energy utility with short maturities ranging from 2010 to 2016 and yields ranging from 2.20% to 4.14%. Morgan Stanley was lead manager on the revenue bonds rated AA by Standard & Poor’s, Aa1 by Moody’s Investors Service. and AA-plus by Fitch Ratings.
On Wednesday, a syndicate led by Morgan Stanley sold the University of Texas System’s $257 million of triple-A rated revenue bonds with yields ranging from 2.14% to 5.35% and maturities from 2010 to 2024.
“With good quality ratings on both of those, there’s still a bid for that kind of debt, it’s just not as strong as in a normal environment,” Timlin said.
This week, small issuers take what little limelight is left, with two Central Texas communities planning to issue about $10 million each.
The Williamson County town of Taylor, north of Austin, is scheduled to sell $10 million of combination tax and revenue certificates of obligation in a competitive deal Tuesday.
Hays County, south of Austin will also sell $10 million competitively the same day.
The town of Little Elm near Dallas will offer $10.3 million of combination tax and limited pledge certificates of obligation in a negotiated deal through First Southwest Co.
And an issuer north of Houston, the Southern Montgomery County Utility District, will sell $6.4 million of unlimited-tax utility bonds on Wednesday. The bonds will be used for various improvements in the district.
Meanwhile, the number of deals listed on the day to day sales calendar, including about 10 from Texas, is building as market uncertainty keeps many transactions on hold.