A pair of deals from two New York municipalities and a Texas sale will headline an estimated slate of $4.47 billion in total new-issue supply in the primary market this week - more than double the revised figures from last week - as municipal volume continues to show signs of recovery from the month-long dry spell inflicted by the nation's financial and economic turmoil.
Last week the market welcomed $1.96 billion, according to Thomson Reuters, and the muni market rallied for the first time in over a month. Demand surged amid attractive long-term interest rates that peaked into the high 5% and low 6% range on high-quality new issues. Yields fell midweek as the market firmed.
The generic, triple-A-rated general obligation bond due in 2038 ended at a 5.17% as of the close of trading on Friday, according to Municipal Market Data.
This week, a handful of sizable deals from Pennsylvania, Michigan, and New Jersey will also help boost negotiated volume to an estimated $3.73 billion versus a revised $1.69 billion last week, according to Thomson Reuters. Negotiated volume is showing more pronounced growth than the competitive market, which is expected to rise to $743.7 million, up from $266.8 million last week.
The activity will kick off in Texas with a $423 million sale of public improvement refunding bonds to be sold by Houston. Goldman, Sachs & Co. said it will price the issue tomorrow following a retail order period today. The bonds, which carry ratings of Aa3 from Moody's Investors Service and AA from Standard & Poor's, are structured to mature serially from 2010 to 2038. The deal is expected to include fixed-rate tax-exempt and taxable bonds, as well as revenue certificates of obligation.
In the New York market, meanwhile, the New York City Transitional Finance Authority is slated to sell $400 million of revenue bonds maturing from 2010 to 2028 with term bonds expected in 2031, 2035, and 2038. The deal, which is rated A1 by Moody's, AA-minus by Standard & Poor's, and A-plus by Fitch Ratings, is planned for pricing by Merrill, Lynch & Co. tomorrow, according to the firm.
The Long Island Power Authority will refund $370 million of variable-rate bonds in a deal that will be insured by Financial Security Assurance and MBIA Insurance Co.
LIPA has underlying ratings of A3 from Moody's, and A-minus from Standard & Poor's and Fitch. The deal will be priced by Goldman tomorrow after it takes retail orders on the bonds today. The structure had not yet been finalized at press time on Friday, according to source at Goldman.
Elsewhere in the Northeast, Philadelphia School District is planning a $395 million sale of GO bonds. Goldman said it will conduct a retail order period today, followed by an institutional pricing tomorrow. Structured to mature from 2010 to 2038, the bonds are rated Aa3 by Moody's, and A-plus by Standard & Poor's and Fitch.
The Garden State will see a $213 million New Jersey Educational Facilities Authority revenue sale on behalf of Princeton University that was delayed from last week due to market timing. The deal, which has natural triple-A ratings from all three major agencies, will be priced on Wednesday following a retail order period tomorrow, and is structured to mature serially from 2009 to 2023.
Looking to the Midwest, another large school GO sale is expected to be priced by Michigan.
Merrill will price the two-pronged deal tomorrow, following a retail order period today, in a structure that includes $145 million of tax-exempt serial bonds maturing from 2009 to 2011 and from 2020 to 2022, as well as $222 million of taxable bonds maturing in 2018 and 2020.
Meanwhile, some deals are still being postponed - but not necessarily because of high interest rates or other unfavorable market conditions.
A $350 million Massachusetts Bay Transportation Authority assessment bond sale that was expected to be priced on Wednesday, following a one-day retail order period tomorrow, is being delayed until after Election Day, according to an underwriter at lead manager JPMorgan on Friday, pending the outcome of a proposition on the Massachusetts ballot seeking to eliminate the state's 5.3% income tax.
The proposal calls for cutting the tax by half the first year and eliminating it altogether the following year, according to published reports. An approval would save the average tax payer an estimated $3,600 a year, but the state will lose an estimated $12.5 billion in annual revenues - roughly 45% of the state's budget of about $28 billion.