The University of Massachusetts Building Authority's $157.8 million of federally taxable refunding revenue bonds will receive demand because market participants find high-education paper attractive, a Florida trader predicted.
"The education sector is on fire, and I think it will be well received, it's under the index size so it will come at a more relaxed spread," the trader.
Ramirez & Co. will price the deal, which is rated Aa2 by Moody's Investors Service, AA-minus by Standard and Poor's and AA by Fitch Ratings.
"There is still a great deal of demand for education paper," the trader in Florida said.
John Dillon, managing director at Morgan Stanley, wrote in a report released on Thursday that he is recommending investors look at the higher education sector, and particularly at bonds that carry A2 or A ratings or better, with 5% coupons.
Citigroup recommended higher education bonds for investors in a report released on Monday, but said investors should instead look at lower-rated long-dated higher education bonds.
"Owing to smaller lot sizes, [lower-rated long-dated higher education bonds] seem to have sidestepped broader market trends and continue to trade at attractive spreads," Citigroup wrote in the report.
Citigroup is recommending issuances rated below BBB because bonds issued by high-grade universities have richened in the recent municipal rally.
"Owing to their superior credit profile, super high-grade universities have richened fairly drastically in the rally and their richness feels sticky," Citigroup wrote in the report.
Bank of America Merrill Lynch will price for retail a two-part deal totaling $894.5 million of Missouri Highways and Transportation Commission refunding bonds to the market Monday, the largest deal of the week. The deal consists of $582 million of first lien refunding bonds and $312.5 million of second lien refunding bonds. The deal will be priced for institutional on Tuesday and is not yet rated.
Municipal bond yields held steady throughout the curve on Monday, according to Municipal Market Data's triple-A scale.
Treasuries were steady Monday morning, with the 30-year yield and the 10-year benchmark remaining at 3.34% and 2.52%, respectively, from Friday's market close. The two-year note strengthened, falling two basis points to 0.36%.
