New York issuers' recent credit upgrades will boost demand for the $1.2 billion four-part sale of New York State Dormitory Authority revenue bonds scheduled for auction on Tuesday.
On Friday Fitch Ratings upgraded New York State's general obligation bond rating to AA-plus from AA, after Moody's Investors Service raised New York State's GO bond rating one notch to Aa1 on June 16. The Metropolitan Transportation Authority of New York was upgraded on Wednesday by S&P to AA-minus from AA-plus.
"With the MTA upgrade the DASNY deal will be met with ample demand," a trader in Chicago said. "We've had the New York state upgraded and MTA upgrade so from a credit trend New York state credits are doing better."
The DASNY deal will come in sections of $387.9 million, $385.72 million, $354.1 million and $86.2 million.
The bonds earned a triple-A rating from S&P and a AA-plus from Fitch.
DASNY did issue $198.6 million school district revenue bond financing program revenue bonds just last month, and New York City issued a two-part GO deal that was upsized to $1.02 billion during its intuitional sale on June 11. While investors are saturated with New York credit, market participants still see buyers grabbing the upcoming DASNY bonds.
"The New York City deal, despite some political negativity, did very well, and with this [DASNY] deal there is less of a political issue," a trader in Florida said.
The Florida trader said that retail's appetite for the bonds will also drive demand.
"New York City in particular is one of the biggest pools of cash, especially for individual investors who have no choice but to buy New York," he said.
He predicted that the bonds will be bought primarily by New York residents, mutual funds, money managers, and insurance companies.
The trader in Chicago said the deal is likely to attract some buyers because investors have more cash on hand during the spring and summer reinvestment period. During reinvestment period market participants receive cash from June 1, June 15 and July 1 coupon payments and bonds maturing.
"I would think the DASNY would do well, based on money coming to market this June, July and August," he said.
Citigroup Global Markets will hold a retail order period for $178 million of Oregon Department of Transportation Highway User tax revenue bonds. The bonds will price for institutions on Wednesday. The deal is rated Aa1 by Moody's, AA by S&P and AA-plus by Fitch.
Treasuries were mixed on Tuesday with the 30-year and the 10-year falling two-year's yields falling two basis points to 3.43% and 2.6% respectively from Monday. The two-year note weakened, rising two basis points to 0.48%.
