Investors predict that both the $402.3 million Dallas Area Rapid Transit and the $357.5 million Houston Independent School District deals will go well, but that investors might be more interested in the transit bonds.
They said this is because the transit bonds might be more attractive to buyers because they are lower rated, and therefore will likely carry higher yields.
The transit bonds were rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's, while the Houston ISD bonds that were backed by Texas' Permanent School Fund were rated triple-A by the same rating agencies.
A trader in Texas thinks that investors will be more interested in the Dallas deal out of the two because it "provides both security and incremental yield".
He also said the transit bonds are attractive because that issuer is not in the market as much as ISD issuers are.
A trader in Chicago also called the transit deal one of the deals to watch this week.
The trader in Texas said that he did think the Houston ISD deal will do well though, even though the bonds will likely be more expensive and even though there have been a decent amount of Texas ISD deals in the market lately. He said this is because the Houston deal's underlying ratings are high.
Moody's underlying rating is still triple-A, and S&P's is AA-plus.
The transit deal has serial maturities from 2015 to 2036 and JPMorgan is the managing underwriter. The Houston ISD deal is composed of limited tax refunding bonds, and RBC Capital Markets will price the deal.
The sale of both deals is scheduled for Wednesday, according to TM3.
MINIMAL IMPACT FOR VOLUME
The pick-up in volume will not have a large impact on trading this week, investors said.
A trader in Chicago said this is because while volume is a lot higher than last week, the rise in issuance is not expected to reach $10 billion. Issuance is scheduled to total $7.9 billion after coming in at $3.4 billion last week.
The hike in issuance also will not have a sizable impact because there are no real heavyweight deals coming to market, the trader in Chicago said. The largest deal expected is the $550 million Connecticut general obligation bond deal on Thursday.
"There's a decently large new-issue calendar, and the largest deal is $500 million so there is a variety of stuff to pick from," he said.
A trader in New York said because there will be so many choices the deals likely will not have a problem getting done.
The trader in Chicago said the deals will be helped by the fact it's a holiday-shortened week next week.
"There's a lot of cash out there, and Nov. 15 is a big rollover payment date," he said. "Fund flows were strong last week, and the year is getting more compact now. This is the last full week of November for trading and underwriting."
Funds that report weekly had $649 million of inflows for the period ending Nov. 12, up from $85.3 million the week before, according to Lipper FMI.
He said he expects buyers to go out and buy bonds from the deals coming this week and buy them aggressively.
The second trader in Chicago said something that could be a problem for issuers is possibility of a continued sell-off.
Municipal bonds sold off two weeks ago, and then held steady most of last week so yields remained at the higher levels. The market continued to sell-off some on Friday, with the benchmark 10-year triple-A GO and the 30-year GO ending at 2.17% and 3.08%, respectively, according to Municipal Market Data's triple-A scale.
Yields continued to rise on Monday with yields on bonds maturing from seven to eight years increasing by one basis point, according to MMD. Yield increased by two points for the nine to 10 year maturities, and by one basis points for bonds maturing from 11 to 12 years and 20 to 30 years.
The rest of the curve held steady.
Treasury yields were mixed on Monday with the two-year note falling two basis points to 0.52% from Friday's close. The 10-year and the 30-year both rose two basis points to 2.34% and 3.06%, respectively.
CONNECTICUT GO TOPS CALENDAR
The Connecticut $550 million GO offering will be priced on Thursday by JPMorgan Securities and will consist of three series of GOs ranging in maturity from 2015 to 2026.
The $240 million Series F green bonds will mature from 2015 to 2034, while the $60 million Series G portion will mature from 2028 to 2031, and Series H, which totals $250 million, will mature from 2016 to 2026.
The bonds are rated AA3 by Moody's Investors Service, and AA by both Standard & Poor's and Fitch Ratings.
In other activity this week, the Arizona Transportation Board will sell $456.47 million of revenue bonds in an all serial bond structure maturing from 2018 to 2025.
JPMorgan Securities will price the deal on Tuesday and the bonds are rated Aa1 by Moody's and AA-plus by Standard & Poor's.
Baltimore will issue $409.83 million of water and wastewater revenue bonds in a new-money deal and refunding being priced by Wells Fargo Securities on Wednesday after a retail order period on Tuesday.
The senior lien series is rated Aa2 by Moody's and AA by Standard & Poor's, while the subordinate lien series in rated Aa3 by Moody's and AA-minus by Standard & Poor's.
