A noticeable surge in new issuance this week could jolt the municipal market out of its recent supply slump as estimated volume is expected to rise to $4.4 billion, according to Ipreo LLC and The Bond Buyer.
That’s nearly double last week’s revised $2.45 billion, according to Thomson Reuters, but still only about half of the typical weekly average of $8 billion.
Competitive supply is estimated to be $2.06 billion, compared with just $810.7 million last week, while the volume in the negotiated market is expected to be $2.33 billion versus a revised $1.64 billion.
“It’s good to see the supply increase both in the negotiated and competitive markets,” said a New York underwriter. “I think we’re going to see some strong names and a positive reception.”
Three well-known New York issuers alone are slated to be in the market with over $1.6 billion of debt — a little more than one-fourth of the week’s estimated volume.
The largest of the Empire State issues is a four-pronged sale of general obligation debt by New York State in the competitive market on Tuesday totaling $830 million.
The deal will consist of $478.92 million of new money maturing from 2012 to 2041, $21.8 million of taxable new-money debt maturing from 2012 to 2021, $231.90 million of refunding bonds maturing from 2011 to 2020, and $98.21 million of taxable refunding bonds maturing from 2011 to 2022.
The state’s GOs are rated double-A by Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings.
The New York Municipal Water Finance Authority will issue $400 million of water and sewer system second general resolution revenue bonds on Wednesday when M.R. Beal & Co. prices the bonds after a two-day retail order period set for Monday and Tuesday. The bonds are rated Aa2 by Moody’s and AA-plus by Standard & Poor’s and Fitch.
The Port Authority of New York and New Jersey will add to the activity on Wednesday when it issues $225 million of consolidated revenue bonds maturing from 2012 to 2028. The bonds are subject to the alternative minimum tax.
“Next week you have a lot of New York deals and a number of health care deals, so I think it’s going to be interesting,” another New York underwriter said Friday.
He noted that deals last week “were priced aggressively on the competitive side, and the market seemed to be controlled by things outside of munis,” such as the flight to quality earlier last week stemming from concerns about Japan. On Friday, the generic, triple-A GO bond in 2041 ended at a 4.68% yield, down from 4.78% on Monday, according to Municipal Market Data.
“People have cash and I think they will be putting it to work” amid anticipation of a light economic calendar, the banker said.
One thing that could somewhat curtail retail demand is tax season, the underwriter noted. “Retail tends to be somewhat iffy going through tax time historically, if they need to sell bonds to pay taxes,” he said.
Two other New York deals include a $130 million sale of dedicated tax fund refunding bonds from the Metropolitan Transportation Authority slated for pricing by Jefferies & Co. on Wednesday followed by a retail order period on Tuesday, and a $115.4 million sale of mortgage revenue bonds from the New York State Mortgage Agency by JPMorgan on Monday.
The MTA bonds are rated AA by Standard & Poor’s and AA-minus by Fitch, but the structure was not available at press time on Friday.
The New York mortgage bonds are rated Aaa by Moody’s and mature from 2015 to 2024, with a term bond in 2027, and a planned amortization class bond in 2029. The pricing from Friday’s retail order period was unavailable at press time.
Elsewhere in the Northeast, Massachusetts will make appearances in the competitive and negotiated markets on Wednesday, selling a total of $438 million.
The competitive sale involves $360 million of GO consolidated bonds maturing from 2022 to 2029, while Siebert, Brandford Shank & Co. will price on Tuesday of another $78.52 million of GO refunding bonds maturing from 2012 to 2021.