The nearly $1 billion Georgia competitive general obligation sale should indicate the muni market's demand for high-grade paper, traders said.
The $977.9 million deal will be auctioned in five pieces from 10:30 a.m., Eastern, Tuesday, until 12:15 p.m. It is rated triple-A by the three major rating agencies. A trader in Virginia said the deal is important because there have not been any large AAA state GOs issued recently.
"We're going to pay close attention to this deal to gauge demand for high-grade," the trader in Virginia said. "It's a bellwether deal to keep your eye on. I think that's why it's an important deal, we have not had a whole lot of large AAA deals in a while. [The Georgia GOs] will be a barometer for that kind of paper."
The lack of supply this year has driven investors to lower-grade, higher-yielding credits. Volume as of May 31 totaled $115.2 billion compared to $153 billion for the same period in 2013. The demand for high-yield is shown through high-yield fund flow reports.
Flows for municipal high-yield bond funds have remained positive all year, and totaled $151.1 million for the week ending June 11, according to Lipper FMI.
"The Georgia deal will show how the market feels about AAA paper, especially because it's not a transportation, utility, school district, or whatever sector the market is herding to right now," a trader in Chicago said.
Market participants predict the deal will be in high-demand because of its size and because it's a Georgia credit.
"The deal totals over $900 million, and a name like [Georgia] gets people's attention," a trader in Texas said.
The trader in Virginia said the deal will aggressively priced because it's competitive.
"Because it's competitive, it will get a fairly aggressive bid from someone," a trader in Virginia said.
Citigroup Global Markets will issue $590 million of Oregon tax anticipation notes on Tuesday. The deal is rated MIG 1 by Moody's, SP-1-plus by S&P and F1-plus by Fitch.
Goldman Sachs will bring a two-part deal totaling $267.8 million of New Orleans, La., water revenue and refunding bonds. The deal is rated BBB-plus by S&P and BBB by Fitch.
Morgan Stanley will sell $170.7 million of Palm Beach County, Fla., school board certificates of participation. The deal is rated Aa3 by Moody's and AA-minus by Fitch.
The New York & New Jersey Port Authority will sell $400 million of consolidated bonds. The deal is rated Aa3 by Moody's and AA-minus by both S&P and Fitch.
Seattle, Wash., will auction $135.6 million of revenue bonds. The deal is rated Aa1 by Moody's and AA-plus by S&P.
