The number of large competitive deals scheduled for auction this week climbed from the past two weeks' issuance because it's an ideal new-issue market, market participants said.
There are four competitive deals expected this week that total over $100 million, led by the $274 million Metro Atlanta Rapid Transportation Authority revenue bonds scheduled for Thursday and the $258 million Columbus, Ohio, bonds on Wednesday.
"There is an uptick in competitive deals," a trader in Chicago said. "Competitive deals are coming because it's an attractive new issue market."
Janney Capital Markets wrote in a report released on Monday the current market is attractive for issuers because interest rates have dropped most of the calendar year to date.
"So far, 2014 could be called a year for issuers," Tom Kozlik, municipal credit analyst at Janney Capital Markets, wrote in the report. "Funding costs remain low from a relative perspective. If interest rates continue to fall as they mostly have in 2014, then the new issuance calendar could start to build at a quicker pace than in recent months."
The trader in Chicago mentioned that more competitive deals may be up for auction because June starts the reinvestment period, where buyers are sitting on cash they received from coupon payments and maturities.
"Reinvestment period is a factor [in more competitive deals coming to market]," he said. "June 1 and July 1 are big interest payment dates."
Back in April and early May many investors had said they stopped looking at competitive deals because they were priced aggressively with incredibly low yields. The trader in Chicago said buyers had really "stepped up and paid some big prices" in those months.
A trader in Florida sees this trend continuing. "[Competitive deals coming to market] will be priced aggressively without a doubt," he said.
The largest long-term bond pricing scheduled for this week is a $431.2 million sale of certificates of participation from the Regional Transportation District of Colorado. The second biggest negotiated deal is the $340 million toll system refunding revenue bond from the Miami-Dade County Expressway Authority.
In short-term deals, Los Angeles County plans to sell $900 million in tax and revenue anticipation notes on Wednesday. This is the largest deal of the week.
In the competitive market, $140 million of Ventura County, Calif., tax and revenue anticipation notes will be auctioned on Monday. The deal is not yet rated.
Treasuries weakened Monday morning, with the 30-year yield climbing three basis points to 3.36% and the 10-year benchmark jumping four basis points to 2.51%. The two-year notes inched up one basis point to 0.39%.
