An $834 million Pennsylvania general obligation sale may get plenty of attention this week in a market with little else to focus on, as volume reverts back to 2014's skimpy norm after inching up last week.
The supply crunch continues to be challenging for investors and issuers alike.
"The low new issue supply is forcing investors into the secondary market for bonds and is keeping bond dealers proud of their offerings and reluctant to cut prices," said Michael Pietronico, chief executive officer at Miller Tabak Asset Management.
The chronically low municipal bond supply is emblematic of both anemic growth in the economy and somewhat higher rates impeding issuers from refinancing debt at a faster rate, Pietronico said.
Ipreo LLC and The Bond Buyer estimate that new, long-term volume will decline this week to $4.46 billion, from the revised $6.37 billion that came to market last week, as reported by Thomson Reuters.
Some observers note a positive aspect to the thin volume.
"The relatively light new issue supply of the first four months of 2014, combined with sustained demand evidenced by positive fund flows, have allowed municipals to significantly outperform taxables this year," said Alan Schankel, managing director at Janney Capital Markets.
As the week's largest deal, the Pennsylvania offering should have extra allure for supply-starved investors. The deal, which is expected to take place in the competitive market on Tuesday, will have a serial structure and consist of $545 million of new-money bonds and $289.45 million of refunding bonds.
The debt is rated Aa2 by Moody's Investors Service and AA by Fitch Ratings.
The rating agencies view the commonwealth's diverse and relatively stable economy and three consecutive timely budgets as key strengths. Its historically-weak financial position and liquidity, as well as its high combined debt position driven by growing unfunded pension liabilities, are the chief credit concerns.
With few other deals to grab investors' attention, an offering from Michigan's Royal Oak Hospital Finance Authority will also be in the spotlight.
The revenue refunding on behalf of the William Beaumont Hospital Obligated Group is planned for pricing by Morgan Stanley on Tuesday with a structure of serial and term bonds rated A1 by Moody's and A by Standard & Poor's.
In other activity, Goldman, Sachs will price two higher education offerings in California on Thursday on behalf of Stanford University, both rated triple-A by all three major rating agencies.
The larger deal is a $290 million revenue sale issued by the California Educational Facilities Authority, while the smaller offering consists of $150 million of taxable bonds issued by the Leland Stanford Junior University.
Goldman was still ironing out the structures for both deals on Friday.
In a separate deal being managed by Wells Fargo Securities, the California Educational Facilities Authority will issue another $125 million of revenue debt on behalf of Stanford University on Thursday rated triple-A by all three rating agencies.
In a related issue, Morgan Stanley will also price $100 million of revenue debt from the California Health Facilities Financing Authority on Thursday on behalf of the Lucile Salter Packard Children's Hospital at Stanford. The bonds are rated Aa3 by Moody's, AA-minus by Standard & Poor's, and AA by Fitch and the structure was being finalized.
The only other competitive deal scheduled is a $199 million sale of North Carolina limited obligation refunding bonds structured as serial maturities from 2017 to 2026 and planned for pricing on Wednesday.
The bonds are rated Aa1 by Moody's and AA-plus by Standard & Poor's and Fitch.
Two other deals pricing this week include a $123 million sale from the North East, Tex., Independent School District of unlimited tax refunding bonds slated for pricing by Citi on Tuesday.
The bonds are structured to mature serially from 2015 to 20333 and are rated Aa1 by Moody's and AA-minus by Standard & Poor's.
In the Southeast, meanwhile, Newport News, Va., is planning to sell $105.84 million of general obligation water refunding bonds on Tuesday. The negotiated deal is being led by Raymond James & Associates Inc. and is structured to mature serially from 2015 to 2034.
