The $1 billion of New Jersey Turnpike Authority revenue bonds priced by Goldman, Sachs Tuesday, the largest deal expected this week, will receive strong demand from the buyside, market participants said.
Yields on the bonds ranged from 3.11% with a 5% coupon maturing in 2027 to 4% at par in 2035.
"It's in the desirable spot of the yield curve, from 2027 to 2035," a trader in Dallas said. "There should be good institutional interest."
The deal received an A3 rating from Moody's Investors Service, an A-plus from Standard & Poor's and an A from Fitch Ratings. There is an optional call at par in 2024.
"We think it will get a lot of buyside attention, since it's the largest deal of the week," the trader said.
Market participants said the Turnpike deal and other larger issues expected this week will receive heavy demand from the buyside because of low supply levels.
"People are starting to really search around for bonds, there's quite a bit more demand than there has been the rest of the month," a trader in Chicago said. "People are starting to pick stuff off and have stopped waiting for yields to rise."
Traders said the demand for the bigger issuance might be heightened even further because re-investment period is beginning.
"The 15th of this month is a pretty big one," the trader in Chicago said. "And June and July are huge redemption days. We will have to buy bonds where they are at."
A trader in New York agreed that the re-investment period will increase demand and keep the municipal market strong.
"Re-investment period is helpful to munis, June redemption and coupon payments should be helpful," he said.
Besides the New Jersey Turnpike deal there are three other sizable negotiated issuances expected to come to market on Tuesday.
Citigroup Global Markets is expected to price $514 million of Pennsylvania Turnpike Commission variable rate revenue bonds. The bonds mature serially from 2015 to 2021 and are rated A1 by Moody's and A-plus by both S&P and Fitch.
The Dormitory Authority of the State of New York will bring $198.6 million of school district revenue bond financing program revenue bonds to market in four series that total $153.7 million, $6.68 million, $29 million, and $9.2 million respectively. RBC Capital Markets is the managing underwriter, and the first series is rated A-plus by S&P and Fitch. The second series earned a Aa3 from Moody's and an A-plus from Fitch, the third received a AA from S&P and an A-plus from Fitch, and the fourth got a Aa2 from Moody's and an A-plus from Fitch.
The University of Massachusetts Building Authority is expected to issue $158 million refunding revenue bonds on Wednesday. The bonds are federally taxable and will be priced by Ramirez & Co. They earned a Aa2 from Moody's, a AA-minus from S&P and a AA from Fitch.
Bank of America Merrill Lynch is expected to hold a retail order period Tuesday on the Jacksonville Electric Authority's $153.4 million of St. Johns Rivers power park revenue bonds. The bonds received a Aa2 from Moody's, a AA-minus from S&P and a AA from Fitch.
No competitive deals totaling over $100 million are expected to come to market today.
The municipal market firmed slightly on Tuesday as yields for bonds maturing in 10 years and from 27 to 30 years fell by up to one basis point, and yields for bonds with 11- to 26-year maturities decreased by as much as two basis points.
Treasuries also strengthened on Tuesday and yields for both the 10-year and the 30-year fell by four basis points to 2.62% and 3.45%, respectively. The two-year note dropped one basis point to 0.41%.
