Investors clamoring for new supply will be faced with slim pickings this week when long-term volume in the tax-exempt market sinks to an estimated $2.61 billion — less than half of last week’s total — as trading and underwriting begins to wind down ahead of Labor Day, according to Ipreo LLC and The Bond Buyer.
After originally being earmarked at $4.77 billion, a revised $5.7 billion actually came to market last week, according to Thomson Reuters. The municipal market rallied to all-time lows last Wednesday for the 12th time in the past three weeks, pushing 10-year tax-exempt yields below 2.20% and 30-year munis lower than 3.70% for the first time in history.
Traders said yields were compressed by a flight to quality among investors unsettled by the volatile stock market and recent negative economic news.
This week, even the short-term market is void of the significantly sized note deals that have propped up the primary market through much of the summer doldrums. Last week, for instance, a $7.8 billion tax and revenue anticipation note sale from the Texas Public Finance Authority thundered into the primary market as the single-largest deal on an otherwise skimpy slate.
This week’s calendar is even thinner, with a $245 million sale of higher education facilities revenue bonds from the Tennessee School Bond Authority taking the lead.
Planned for competitive pricing on Wednesday, the deal will consist of $226.9 million of tax-exempt bonds and $18.1 million of traditional taxable debt — both structured to mature serially from 2011 to 2040. The bonds are expected to be rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.
In the negotiated market, the Harris County, Tex., Flood Control District is on tap to issue $205 million of contract-tax refunding bonds, which will defease all or a portion of its outstanding commercial paper notes as well as pay the cost of issuance, according to the preliminary official statement.
Goldman, Sachs & Co. plans to price the deal on Tuesday with AAA ratings from Standard & Poor’s and Fitch. In a report ahead of the deal, Fitch said its ratings are supported by the district’s strong financial management and the conservative budgetary practices of the county’s administrative team. Those practices include maintaining large financial reserves, high liquidity levels, and ample taxing margins.
Elsewhere, Huntsville, Ala., is gearing up to sell around $173 million of general obligation capital improvement and refunding warrants. Morgan Keegan & Co. is planning to price the issue on Wednesday in four series, all of which are rated triple-A by Moody’s and Standard & Poor’s.
The POS says the deal is comprised of $91 million of tax-exempt GO refunding and capital improvement warrants maturing from 2011 to 2037; $62.5 million of taxable GO capital improvement warrants designated as Build America Bonds maturing from 2011 to 20230; $11.7 million of traditional taxable GO refunding warrants maturing from 2011 to 2027; and $7.5 million of taxable GO capital improvement warrants designated as recovery zone bonds maturing in 2031 and 2032.
Two relatively small Colorado school deals will also make an appearance this week. The larger of the pair is a GO offering from the Denver School District No. 1 that could total between $119.7 million and $124.2 due to the refunding portion.
George K. Baum & Co. will price the deal on Wednesday following a retail order period on Tuesday, with ratings of Aa2 from Moody’s and AA-minus from Standard & Poor’s.
The deal consists of $89 million of tax-exempt refunding bonds maturing serially from 2011 to 2023.
Proceeds will advance refund roughly $88.4 million of Series 2004 bonds, including portions of the 2019 through 2023 maturities.
In addition, it also includes $29.3 million of taxable, direct-pay qualified school construction bonds maturing in 2027, and $1.54 million of direct-pay taxable BABs maturing in 2028.
Elsewhere, the Douglas County School District No. RE-1, is planning to sell $103.6 million of GO refunding bonds. RBC Capital Markets will price the deal on either Tuesday or Wednesday with serial bonds maturing from 2010 to 2026.