Plunging interest rates are luring more issuers to market, encouraging market participants to believe muni volume for the final months of 2011 can increase from recent anemic levels.
The Federal Reserve’s Operation Twist announcement helped push muni yields to record lows last week, and tax-exempt issuers can be expected to take advantage of current ultra-low borrowing costs.
The new-issue calendar should expect to see $6.83 billion this week, down slightly from last week’s revised $7.86 billion. The negotiated market shows $4.73 billion on the calendar, down from last week’s revised $6.17 billion.
The competitive market will jump to $2.11 billion this week, up from last week’s revised $1.65 billion.
“The stars are aligning for a busier but welcome pace as we head towards the final quarter of the year,” wrote Tom Kozlik, municipal credit analyst at Janney Capital Markets.
He noted that volume has picked up as the low rate environment encourages refinancing, and as rates have fallen, refundings have increased. Muni bond fund flows are also positive for the third consecutive week, positively impacting the demand side, Kozlik noted.
And even before the Fed’s announcement last week, new-issues priced well. There was aggressive bidding in the competitive market on both the $500 million Massachusetts and $300 million Ohio general obligation issues.
This week in the negotiated market, the Port Authority of New York and New Jersey will issue $1 billion of consolidated bonds, priced by Citi. The bonds are rated Aa2 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings. They are expected to come to market Tuesday.
New York City will issue $752.4 million of GOs priced in three series. The bonds are rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch. Siebert Brandford Shank & Co. held a retail order period Friday. A second retail order period was expected Monday and institutional pricing Tuesday.
Yields for $584.8 million of Series D bonds ranged from 1.42% in 2017 to 3.90% in 2037. Yields for $137.6 million of Series H bonds ranged from 0.37% in 2013 to 2.18% in 2020.
The Las Vegas Valley Water District will come to market with $440.5 million of limited-tax refunding GOs in three series. The first will be $130.5 million of taxable Series 2011B, followed by $265.1 million of tax-exempt Series C and $44.9 million of tax-exempt Series D.
Priced by JPMorgan, the bonds are rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
JPMorgan will be lead underwriter for $422.2 million of airport system revenue bonds issued by the city and county of Denver. The bonds will be priced in three series, with $201 million of Series B bonds subject to the alternative minimum tax, $109.4 million of Series C bonds that are not subject to the alternative minimum tax, and $111.8 million of Series D taxable bonds. The bonds are rated A1 by Moody’s and A-plus by Standard & Poor’s and Fitch.
In the competitive market, Minnesota will issue $922 million of GOs Tuesday. The first pricing will be $4 million, followed by $320 million, $445 million, $107.9 million, and $44.8 million. The bonds are rated AA-plus by Fitch.
Also on Tuesday, the Arizona Department of Transportation will issue $164.5 million of revenue bonds.
Wednesday will see a $170 million revenue bond issue from the Maryland Department of Transportation.
Not included on the long-term supply calendar is $820 million of short-term notes that will be issued Tuesday by the District of Columbia. The notes are rated M1G-1 by Moody’s and F1-plus by Fitch.