New York’s Triborough Bridge and Tunnel Authority is expected to bring a hefty deal to the municipal marketplace this week, and Maryland will flaunt its triple-A status with a competitive offering for more than $650 million of tax-exempt and taxable debt.
Municipal market volume should climb, albeit barely, from last week’s modest levels. Potential muni volume is expected to total $5.62 billion, up from total sales of $5.21 billion last week.
Industry investors are so hungry for tax-exempt paper that they’re likely to jump at the meager supply, despite the fact that it arrives in an environment of historically low yields.
The appetite and demand is overwhelming, to the point where yields are being adjusted downward regularly, said Daniel J. Genter, chief executive and investment officers of Los Angeles-based RNC Genter Capital Management, which manages about $2 billion of muni bonds.
“I don’t think we’ll have any problem absorbing [the week’s calendar], from what we’ve been seeing,” he said. “We’re seeing very, very strong demand. They’ve generally been oversubscribed to where they’re bumping up the offering or bumping up the price.”
Digging into the numbers, bonds scheduled for competitive sale this week total $1.46 billion, compared to $1.86 billion last week. And there are $4.16 billion of muni bonds scheduled for negotiated sale this week, versus a revised $3.35 billion that were sold last week.
On the negotiated side, Goldman, Sachs & Co., is expected to price $1.15 billion of Triborough Bridge and Tunnel Authority — known formally as MTA Bridges and Tunnels — general revenue refunding bonds. The bonds are rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings.
Proceeds will go to refund Series 2002B bonds maturing out to 2042. They should arrive structured as serials maturing in 2032.
Goldman is holding a retail order period Wednesday. Institutions should be able to participate one day later.
Citi is expected to price $510 million of Michigan Finance Authority state aid revenue notes. The notes were not rated at press time. They are scheduled to arrive Tuesday.
Barclays Capital should price about $365 million of California State University Trustees system-wide revenue bonds in taxable and tax-exempt series. Ratings were not available by press time. Both series are expected to price Thursday.
The tax-exempt series, $348.2 million, should arrive structured as serials, maturing 2013 through 2042. The taxable series, $16.8 million, should arrive structured as terms, maturing in 2022 and 2036.
The negative headlines about financially troubled municipalities in California aren’t intimidating investors in the Golden State’s bonds, Genter said. The market seems to be shrugging off the default and bankruptcy news surrounding the cities of San Bernardino and Stockton. “The market is looking for yield, has a big appetite,” he said. “It’s ignoring all of that. We’ve seen risk premiums shrink rather than expanding, even here in California.”
Morgan Stanley is set to price $350 million of Fairfax County, Va., Industrial Development Authority health care revenue bonds for the Inova Health System. The bonds are rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
Ziegler Capital Markets is scheduled to sell $311 million of Kansas Development Finance Authority hospital revenue bonds for the Adventist Health System/Sunbelt Obligated Group. The bonds, expected Tuesday, are rated Aa3 by Moody’s, AA-minus by Standard & Poor’s and AA by Fitch.
Maryland leads the competitive side of the ledger. It is expected to auction $430 million of general obligation state and local facilities loan bonds.
The state is also expected to auction $187.6 million of GOs, state and local facilities loan refunding bonds. Both series of bonds are rated triple-A by the major rating agencies. They are expected to arrive Wednesday, structured as serials. The heavier series will mature from 2015 through 2027. The lighter series is expected to mature in 2018 through 2020.
The state should also auction two additional taxable series that total $35.3 million on the same day.
The Missouri Board of Public Buildings is expected to auction $307.7 million of special obligation refunding bonds. The bonds are rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch. The bonds, expected Thursday, should arrive structured as serials.
Last week’s calendar deals priced during a market environment that saw yields plunge ever deeper into record territory. That should provide momentum for this week’s deals, said Alex Grant, a portfolio manager at RS Investments, a San Francisco-based firm with $740 million in muni assets under management.
“There seems to be a lot of cash flowing into municipal funds,” he said, “so that’s a little bit the catalyst to sop up these deals.”