Even amid record-low muni yields, new issuance is expected to take a hit this week, with $3.65 billion of new money coming to market, down from last week’s revised $4.72 billion.
The competitive market will see $763.3 million this week versus last week’s revised $1.15 billion, and the negotiated market will see $2.89 billion compared to a revised $3.57 billion last week.
The biggest deal by far this week is $9.8 billion of short-term notes from Texas, which are not included in The Bond Buyer’s visible supply. The tax and revenue anticipation notes will be offered in the competitive market Tuesday and are rated MIG-1 by Moody’s Investors Service and SP-1-plus by Standard & Poor’s.
In the negotiated market, the San Francisco Airport Commission will issue $452.1 million of taxable and tax-exempt bonds on Tuesday and Wednesday, respectively, for San Francisco International Airport. The taxable bonds have serial maturities from 2017 to 2030 and the tax-exempt bonds have serial maturities from 2013 to 2026.
San Francisco “is a name that investors love,” a banker from lead-underwriter De La Rosa & Co. said. “It is one of the best trading airport names in California and we expect it to be very well received by investors.”
JPMorgan is the lead underwriter on three of the bigger negotiated deals coming to market, including King County, Wash., which is issuing $403 million of sewer revenue and refunding bonds. The bonds are rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
JPMorgan will also be the book-runner on $169.2 million of general obligation bonds issued by Rhode Island.
About $145 million will be consolidated capital development loan bonds and have serial maturities ranging from 2012 to 2031. Another $24 million will be consolidated capital development loan refunding bonds and have serial maturities from 2012 to 2015. They are rated double-A by Moody’s, Standard & Poor’s and Fitch Ratings.
Additionally, JPMorgan will price $167 million of utilities system refunding revenue bonds from Colorado Springs, which are rated double-A by all three major credit agencies.
Houston is set to come to market Tuesday with $175 million of combined utility system first-lien revenue refunding bonds, which will be priced by Wells Fargo. The bonds are rated AA by Standard & Poor’s and AA-minus by Fitch, and have serial maturities ranging from 2012 to 2021.
If last week told us anything, deals this week should go very well.
“The Indiana Finance Authority, which was just shy of $1 billion, had in excess of over $3 billion in orders,” said Scott Cottier, portfolio manager for the Rochester municipal investment team at OppenheimerFunds Inc. “The deal was bumped significantly from its original price. For every dollar of bonds there were three to four people that wanted to buy it. And when the price was bumped up on several maturities, those investors stayed and paid. So that deal was well received.”
Cottier added that while Indiana had a high rating, it was “by no means a triple-A rated credit.” And having a split rating by the agencies sometimes hurts credits. “But as evidenced by the order flow, the deal was done very well.”
Cottier also said he is not surprised to see a pickup in deals rated double-A and higher this week. “The market has demonstrated a very large appetite for high-rated deals,” he said. “The market can chew through deals in those sectors.”
But certainly issuance is nowhere near normal, where 30-day visible supply can reach $30 billion.
“So the market is still in favor of positive performance relative to other fixed-income assets,” Cottier said. “Issuance is picking up, but still is less than a third of a normal 30-day visible supply.”