The municipal bond market expects another reasonably healthy week of new issuance.
Market estimates hold that municipal bonds to be sold this week total $8.3 billion, versus a revised $11.8 billion last week. The expected calendar follows a week in which the market found buyers for one of the year's biggest grouping of deals with few concessions.
The Massachusetts Building Authority leads the charge this week with an expected pricing of $750 million of sales tax refunding bonds. The week carries some heavy taxable and tax-exempt combination deals, as well as several large health care-related issues.
Last week's massive slate speaks to the history of hefty June issuance, said Justin Hoogendoorn, managing director of the strategic analytics group for the BMO Capital Markets fixed-income team.
"In June, as issuers are setting their budgets, looking to get things done prior to the new budget year, you tend to have a lot of projects approved," he said. "People are starting to prep for the summer months, when you don't have as much supply. So they're building up their positions in a healthy way, anticipating less supply."
This activity tends to narrow in July and August, which sets the stage for muni outperformance during those months, Hoogendoorn added.
Set for sale this week are $1.89 billion in competitive offerings, compared with a revised $1.36 billion last week. Additionally, $6.44 billion in negotiated deals is on tap, versus a revised $10.40 billion last week.
In the negotiated market, Citi is expected to price $750 million of Massachusetts Building Authority refunding bonds. The bonds are rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings. They are expected to arrive Tuesday, maturing from 2021 through 2027, and one term in 2030.
Goldman, Sachs & Co. is slated to price $624.8 million of Colorado Housing and Finance Authority revenue bonds in both taxable and tax-exempt series. The bonds, which should arrive Wednesday, are rated Aa2 by Moody's and AA by Fitch. The taxable series, $531.5 million, is structured as serials, maturing between 2013 and 2017. The tax-exempt series, $93.3 million, should mature in 2014.
The mostly taxable Colorado deal is a relatively new credit in the marketplace, said James Ahn, executive director at JPMorgan Asset Management.
"There's demand for high-quality, taxable munis out there, so this deal should do well," Ahn said. "It'll be a nice, new, diversified credit in the market."
JPMorgan is expected to price $580.7 million of Louisiana general obligation refunding bonds in taxable and tax-exempt series. The bonds are rated Aa2 by Moody's and AA by Standard & Poor's and Fitch. A retail order period should take place Tuesday; institutions can participate on Wednesday. The tax-exempt series, $436.4 million, is set to mature from 2013 through 2026. The taxable series, $144.3 million, should mature in 2020.
The approximately $500 million Detroit Water and Sewerage Department deal was postponed last week, on account of headline risks. The issue is day-to-day.
The calendar packs several large health care-related deals this week. Deals totaling more than $900 million arrive from municipalities in North Carolina, Ohio and Pennsylvania.
"They should see good demand, given that there is still money to be put to work and people are still focused on trying to capture yield," said Priscilla Hancock, executive director and municipal strategist at JPMorgan Asset Management. Some health care issues tend to be lower quality.
Georgia anticipates a big week in the competitive market. On Thursday the Peach State is expected to auction $520.1 million of tax-exempt GO bonds, and $79.9 million of taxable GOs.