As investors continue to struggle with low absolute yields, issuers in the Northeast and California will dominate most of the primary market with relatively large financings — led by $800 million from the Bay Area Toll Authority — as part of an estimated $10.6 billion of new, long-term volume, according to Ipreo LLC and The Bond Buyer.
Last week, a revised $7.88 billion entered the market on the heels of $6.10 billion the previous week, according to Thomson Reuters. That volume is down from the high of $11.05 billion in the week of Oct. 4.
New issues have required modest price cuts to get done in recent weeks, Matt Fabian, managing director at Municipal Market Advisors, said in his weekly outlook. He expects to see more concessions again this week as the primary market will “adopt wider spreads to move product and attract demand.”
Adam Weigold, a portfolio manager at Eaton Vance Management in Boston, however, expects the week’s primary slate “will be digested without too much of a problem” since municipals are still cheap relative to Treasuries and deals with sizable Build America Bond components are helping to provide some extra yield.
Separately in the short-term market, a $1.1 billion general obligation note sale from Michigan is scheduled to be priced by Goldman, Sachs & Co. on Wednesday. Notes are not included in the estimated weekly volume. The deal is rated MIG-1 by Moody’s Investors Service and SP1-plus from Standard & Poor’s.
In the long-term market, the Bay Area Toll Authority deal will arrive as two separate series of subordinate toll bridge revenue bonds when co-senior managers Bank of America Merrill Lynch and Citi price the offering on Thursday, following a retail order period on Wednesday.
The deal will be comprised of $400 million of taxable BABs maturing in 2030, 2040, and 2050, and $400 million of tax-exempt debt maturing from 2020 to 2030 with term bonds in 2040 and 2050. Both series are expected to be rated A1 by Moody’s and A-plus by Standard & Poor’s. They will finance the authority’s capital projects, according to the preliminary official statement.
The San Francisco Airport Commission is set to market a $352 million revenue refunding on behalf of San Francisco International Airport.
Siebert, Brandford Shank & Co. will price the four-pronged tax-exempt offering on Wednesday. The deal includes one series of bonds that are subject to the alternative minimum tax and three series that are non-AMT.
The ratings and the structure were not available at press time, according to an underwriter at Siebert.
The San Diego County Regional Transportation Commission will round out the activity in California when it issues $350 million of revenue debt on Wednesday to be priced by Barclays Capital.
The deal is rated Aa2 by Moody’s and AAA by Standard & Poor’s. It consists of $342 million of BABs maturing in 2048 and $8 million of tax-exempt debt maturing from 2011 to 2020.
Northeast activity, meanwhile, will center around a $750 million sale from the New York City Transitional Finance Authority consisting of future tax-secured subordinate revenue bonds issued as fiscal 2011 Series B.
Sub-series B1 will include $620 million of taxable bonds designated as BABs, while Sub-series B-3 will include $30 million of tax-exempt securities. Both series are being senior-managed and priced by Morgan Stanley and are expected to be rated Aa1 by Moody’s, and AAA by Standard & Poor’s and Fitch. Another $100 million of Sub-series B-2 consisting of traditional taxable debt will be sold competitively on Tuesday.
Connecticut will offer a hefty $700 million of special tax obligations structured as BABs and tax-exempt securities. The Citi-led deal is slated for pricing on Wednesday and is rated Aa3 by Moody’s and AA by Standard & Poor’s and Fitch.
A total of $400 million will be structured as taxable bonds, while $200 million will be new-money debt and another $100 million will consist of refunding bonds.
A $620 million revenue bond deal from Philadelphia International Airport will round out the Northeast’s trio of large deals. They are rated A2 by Moody’s, A-plus by Standard & Poor’s, and A by Fitch, and are expected to be priced for retail investors by Bank of America Merrill Lynch on Monday, after the conclusion of its retail order period last Friday.
The bonds are structured as $326.5 million of revenue refunding debt, and $267.67 million of airport revenue debt.
Last week, muni yields rose slightly as $8 billion of new issues made its way to market amid already low absolute yields
The leader was $651 million of taxable Mississippi GOs, $371.7 million of which were BABs. The final 2034 maturity was priced at par to yield 5.245%, or 3.41% after the subsidy, and 220 basis points over the comparable Treasury yield.
The generic 30-year triple-A GO closed at a 3.75% at the end of trading Friday, according to Municipal Market Data, after it had ended at a 3.77% last Monday.