The municipal market can expect another middling week of new issuance.
Estimates hold that anticipated volume for the week should reach $7.64 billion. But as muni investors continue to sit atop piles of cash and fundamentals remain strong, demand in the market should easily absorb the amount.
An expected $1.5 billion taxable deal from Catholic Health Initiatives leads the calendar. Also, a $550 million offering of California general obligation refunding bonds should pace competitive offerings.
The total volume estimate breaks down into $1.71 billion of competitive deals scheduled for sale, compared with a revised $1.64 billion last week. Also slated are $5.93 billion of negotiated deals, up from a revised $5.80 billion last week.
A recent history of easy absorption of new issuance and continued solid inflows to muni bond mutual funds point to sustained demand across the market for tax-exempt paper. They have the market poised for another feeding frenzy at the volume trough, according to James Colby, a portfolio manager and senior municipal strategist at Van Eck Global.
“Munis continue to move in an upward trajectory, in terms of impressive demand to take on all the supply that’s given,” he said. “I don’t see anything that’s going to interrupt that … The appetite for munis remains strong and consistent. And it should continue that way because there still is a relative-value play to be had for munis.”
Among the week’s negotiated deals, taxable and tax-exempt deals from Catholic Health Initiatives, in Colorado, should take the pole position. JPMorgan is expected to price $1.5 billion of taxable bonds and another $100 million of tax-exempt debt. The bonds are rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings.
The credits should arrive Thursday, with the taxable paper maturing in five, 10 and 30 years. An additional $100 million of tax-exempt paper should mature from 2026 through 2033, as well as one term in 2039.
Bank of America Merrill Lynch is expected to price $890.4 million of Honolulu city and county GO bonds. They are rated Aa1 by Moody’s and AA-plus by Fitch.
Three series of the $553.8 million tax-exempt component should arrive as serials maturing in various portions between 2013 and 2037. The other four series of the $336.6 million taxable piece are expected to arrive as serials maturing in various segments between roughly 2015 and 2028.
A retail order period is expected for the bonds on Wednesday. Institutions should have their shot at the paper on Thursday.
Citi is expected to price $488 million of Miami-Dade County subordinate special-obligation refunding bonds. The bonds are rated A2 by Moody’s and A-plus by S&P and Fitch. They should arrive Wednesday, structured as both serials, maturing from 2014 through 2032, and terms in 2035 and 2037.
California paces the competitive side of the ledger with an expected auction for $549.8 million of various purpose GO refunding bonds. The bonds are rated A1 by Moody’s and A-minus by S&P and Fitch.
The credits should reach the market Tuesday, structured as serials, maturing from 2013 through 2032.
There should be plenty of demand for the deal, said Paul Montaquila, vice president of fixed income for the San Francisco-based Bank of the West. Meanwhile, a law involving California’s budget fuels that demand, he added.
“The good thing about California GOs? It’s written in the state law that they can’t issue GO bonds if the state operates in a deficit,” Montaquila said. “And we’ve been operating in a deficit for so long that there have been these huge blackout periods where the state cannot issue GOs. So, when GOs do come, they get devoured. A GO refunding will get absorbed very easily.”