Of the estimated $3.92 billion expected to be sold in the negotiated market this week, a $1.1 billion deal from the Texas Transportation Commission will arrive tomorrow in the Lone Star State, where two other sizable deals are expected to focus investor’s attention during a relatively light, holiday-abbreviated week.
Last week, there was $2.68 billion in negotiated volume priced, according to Thomson Financial. Overall, this week’s total volume is expected to reach $4.55 billion on the heels of a revised $4.01 billion last week. That figure includes $628.6 million of competitive volume, down from a revised $1.33 billion of competitive supply last week.
Scheduled to be priced by UBS Securities LLC tomorrow, the TTC deal consists of serial bonds maturing from 2009 to 2033 with a term bond expected in 2037. The mobility fund bonds are rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.
Also tomorrow, the Texas Public Finance Authority is slated to sell $230 million of general obligation refunding bonds maturing from 2009 to 2012 and in 2015.
The Texas activity will also include a $240 million deal from the Camino Real Regional Mobility Authority that consists of pass-through toll transportation revenue bonds being priced by Citi on Thursday. Rated A2 by Moody’s and A by Standard & Poor’s, the deal is structured with bonds maturing from 2012 to 2022, and as of Friday afternoon underwriters were discussing the possibility of insurance.
Insured bonds or those backed by the Texas Permanent School Fund that were priced in Texas last week were “very aggressive” compared to historical levels, according to Steve Young, managing director of underwriting at Samco Capital Markets in Dallas. But he said there was still brisk retail and institutional demand because supply has been relatively manageable lately.
For instance, a $22.3 million Allen Independent School District deal that was backed by the PSF and won by Morgan Stanley last Wednesday, had a final 2028 maturity with a 4¼ coupon and a 4.30% yield — which was only two basis points cheaper than the national insured Municipal Market Data scale on the same day.
“We are approaching record lows in yields, and our bonds are following suit,” Young said last Friday. The state’s volume could start to improve — especially refunding deals — if Texas yields continue to drop in line with the MMD yield curve. “The market is showing it could handle some new volume,” Young said.
He predicted continued strong demand for this week’s upcoming sales, and municipals in general.
“I would think those would get good demand because they are highly regarded issuers,” Young said of the TTC and TPFA deals. “Municipals are one of the assets of choice now because of the current flight to quality that all the markets are seeing.”
Elsewhere in the market, a $380 million revenue deal from Harvard University is slated to be priced by Morgan Stanley either today or tomorrow. Details on the structure and ratings were unavailable on Friday before press time.
In the competitive market, meanwhile, the only sizable deal over $100 million is a two-pronged general obligation sale is scheduled for tomorrow by Mecklenburg County, N.C. The county, which has natural triple-A ratings from all three major agencies, will sell $148.5 million of GO public improvement bonds and $12 million of GO bonds — both of which mature from 2009 to 2028.
