The $1.2 billion four-part New York State Dormitory Authority's rare competitive revenue bond sale scheduled for Tuesday will spark a brawl between underwriters, traders said.
DASNY's well-known name and the size of the deal forces underwriters to participate in the auction, traders said, along with the fact that DASNY deals are usually negotiated.
"There is a significant amount of risk for underwriters who do not show up for that deal because most [DASNY] deals come negotiated," a trader in Florida said. "The bidding will be aggressive."
The issuances' largest section totals $387.9 million, followed by $385.72 million, $354.1 million and $86.2 million, respectively.
"Everyone is trying to sell before the week of the fourth of July, this is the biggest competitive deal of the week," a trader. "Of course there's going to be a fight and of course it's going to be aggressive.
The bonds earned a triple-A from Standard & Poor's and a AA-plus from Fitch Ratings.
"The fact that it's coming competitive will be a little different, historically a lot of the DASNY's bigger deals have come negotiated," a trader in Chicago said. "This will test the market."
DASNY recently issued $198.6 million school district revenue bond financing program revenue bonds on May 13. The May deal, which also came in four parts, with the biggest section reaching $153.88 million, was priced by RBC Capital Markets at yields ranging from 0.42% with a 2% coupon in 2016 to 4.10% with a 4% coupon in 2043.
"[RBC] has a shot at maintaining and being in part of the management group, but there will be a fight between the top five underwriting groups," the trader in New York said.
The other notable competitive deal scheduled to come to market is $1 billion of double A-plus rated Washington general obligation bonds to be auctioned on Wednesday.
Total potential volume for this week is $8.90 billion, slightly less than last week's issuance of $9.29 billion, but better than the average week this year, according to Ipreo and The Bond Buyer. This is the second heaviest week of supply for the month of June.
Though issuance has picked up a bit in the past few weeks, "year-to-date municipal market issuance is 25% lower than last year's at $115 through the end of May," according to data from Thomson Reuters. Last year the year-to-date total was $153 billion.
A total of $344 billion of bonds were sold in the primary market last year. Janney Montgomery predicts new issuance for this year to be lighter, coming in between $250 billion and $275 billion.
Ramirez & Co. will bring $1.4 billion of Los Angeles County tax and revenue anticipation notes to the market on Thursday, the largest deal of the week. The deal received a MIG 1 rating from Moody's Investors Service, SP-1-plus from Standard and Poor's and F1-plus from Fitch Ratings.
Other large deals in the negotiated market this week include $631 million of triple-A rated Texas Public Finance Authority refunding general obligation bonds and $500 million of double A-plus rated GOs from the commonwealth of Massachusetts.
Municipal bond yields held steady throughout the curve on Monday, according to Municipal Market Data's triple-A scale.
Treasuries strengthened Monday, with the 30-year yield falling one basis points to 3.44% and the 10-year benchmark slipping two basis point to 2.6%. The two-year yield was unchanged at 0.46% from Friday's market close.
