Summer Shows Up and Slows Things Down

With the unofficial start of summer this past weekend, the municipal market is set to slow down this week.

Whereas last week saw $9.2 billion of municipal bonds come to the market, as of Friday morning $4.6 billion was expected for the coming week, a 50% decline.

Of course, this week is short a business day. Volume per day is expected to be down a still-substantial 37%.

"Less supply will allow dealers to sell unsold balances," said Matt Fabian, managing director of Municipal Market Data.

Primarily events external to the market drive it, according to Fabian.

Volume should build in June, he said.

"The calendar [this week] is going to be very much manageable after what was a fairly large week," said James Ahn, portfolio manager with JPMorgan's asset management municipal strategies group.

The past week was the second largest of the year, he noted. Only the week of March 4 had a larger volume, $10.2 billion.

This week volume will not quite fulfill demand, Ahn said, because of continued inflows into bond mutual funds and the strong amount of rollovers.

"I think there's investor demand for various types of bonds across all ratings," he said.

The amount of negotiated offering is down more than the amount of competitive deals. While the former is expected to decline 55% to $2.911 billion, the latter should drop 38% to $1.714 billion.

By far the biggest deal this week is in the competitive market. The Virginia Transportation Board is bringing $600 million of capital project revenue bonds to market on Thursday. The bonds have serial maturities ranging from 2013 to 2037.

The bonds are rated AA-plus by both Standard & Poor's and Fitch Ratings. The A Series bonds are callable at par in 2022.

Public Resources Advisory Group is serving as the financial advisor.

The next largest bond is a considerably smaller $232.8 million offering from the Massachusetts Water Pollution Abatement Trust. The Series 2012B and Series 16B bonds are state revolving fund bonds. The negotiated bonds have Jefferies & Co. as senior manager.

These bonds are rated triple-A from all three major rating agencies.

The bonds will go to retail on Tuesday and Wednesday and to institutions on Wednesday.

The Series 2012B is a refunding and is a serial bond with maturities from 2013 to 2032. The Series 16B is new money and will probably have the same serial maturities plus term maturities in 2037 and 2042, a Jefferies source said.

The 16B bonds will be callable at par at a to-be-determined date. As of Friday no decsion had been made about whether the 2012B would be callable..

A competitive deal will be the third largest of the week. The Triborough Bridge and Tunnel Authority will bring $225 million to market on Wednesday.

The Series A revenue bonds are rated Aa3 by Moody's Investors Service and an equivalent AA-minus by Standard & Poor's.

Lamont Financial is serving as the financial advisor. The authority will use the money to finance projects for Metropolitan Transportation Authority bridges and tunnels.

The bonds are serial bonds with maturities running from 2013 to 2042.

The fourth largest bond hails from the Indiana Finance Authority. Morgan Stanley will be senior manager on $200 million of Midwestern disaster relief revenue bonds. Both S&P and Fitch rate the bond BBB-minus. Moody's has given a similar Baa3 rating.

While neither the day of issue nor the structure of the negotiated bond was available at press time, the bonds are to be callable in 2022.

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