A Puerto Rico infrastructure financing and a Detroit water revenue sale will lead the activity in the primary market this week as volume is expected to dip slightly from last week. There will be a heightened sense of urgency to grab available paper before the holiday lull.
According to The Bond Buyer and Ipreo LLC, an estimated $5.69 billion of total new volume is expected on the heels of a revised $6.27 billion last week.
A $568.2 million taxable revenue offering from the Puerto Rico Infrastructure Financing Authority will lead the $4.09 billion of negotiated sales expected this week. That’s down from the revised $4.48 billion that made its way to market last week as buyers flush with reinvestment cash clamored for new paper and municipals held most of the week’s gains.
It was an eventful week that saw the benchmark 10-year yield skip down three basis points Thursday to 1.97%. It fell 61 basis points since Oct. 12, and equals the lowest point it reached in 2011, on Sept. 23.
The tumble lowered the 10-year’s ratio to Treasuries to 100% from 106.37% three days ago, considerably closer to the 2011 calendar-year average of 97.26%.
This week, underwriters expect the calendar to be “pretty decent” and “average” in size judging by recent weeks’ volume, and said it should be met with keen interest from investors and feel little impact from Tuesday’s planned Federal Open Market Committee policy meeting.
“I think people are looking at it as probably the last major week of the year as far as issuance,” a New York underwriter said.
“There will be some issuance the following week, but it won’t be as busy,” he said. “I would expect it to be fairly light after that for the remainder of the year.”
He said investors last week absorbed new issues and there was a “good tone” to the market as Municipal Market Data bumped yields on the generic triple-A scale throughout most of the week.
This week’s upcoming Puerto Rico sale will be priced by Wells Fargo Securities for retail investors on Wednesday and for institutions on Thursday. It will include both bonds subject to the alternative minimum tax and non-AMT bonds, and is rated Baa1 by Moody’s Investors Service and BBB by Standard & Poor’s. It will be the third week that a Puerto Rico offering makes a splash in the market.
Last week, one of the largest deals was Wednesday’s $443.8 million Puerto Rico Public Finance Corp. 2011 Series B commonwealth appropriation bond sale, priced by Barclays Capital.
The bonds, which are rated Baa2 by Moody’s and BBB-minus by Standard & Poor’s, offered a final 2031 that included a 5.50% coupon priced at par — highly attractive for investors clamoring for yield before year-end. At the time, the generic, triple-A general obligation bond due in 2031 yielded 3.32%, according to MMD.
In other negotiated activity, Detroit is expected to sell $493.3 million of senior-lien water revenue bonds on Wednesday in a deal senior-managed by Siebert, Brandford, Shank & Co. The financing, which is rated A1 by Moody’s and A-plus by Standard & Poor’s, will be comprised of $481.9 million of tax-exempt bonds in Series 2011A, and $11.4 million of taxable bonds in Series 2011B.
In the competitive market, an estimated $1.59 billion is expected, including a $552 million revenue sale from New York’s Empire State Development Corp. on Thursday. A $400 million competitive note sale from Suffolk County, N.Y., is also planned that day.
Last week, the market saw a revised $1.75 billion of competitive volume.
