A $450 million Illinois toll road financing, and a $255 million note deal for a New Jersey stadium project will do little to resuscitate the new-issue market this week as volume is expected to fall by more than one third from last week's total.
Issuers are expected to price an estimated $3.91 billion of new issuance, according to Ipreo LLC and The Bond Buyer, led by the Illinois State Toll Highway Authority senior revenue financing planned for pricing on Wednesday by Citi.
The bonds, which are structured to mature serially from 2025 to 2034 with a term bond in 2039, are rated Aa3 by Moody's Investors Service, and AA-minus by Standard & Poor's and Fitch Ratings.
This week's estimated volume pales in comparison to the revised $6.22 billion that actually arrived last week, according to Thomson Reuters.
The upcoming week's supply is less than the year-to-date weekly average of $5.1 billion.
The scarcity has helped support the market.
"Strong demand and below average supply have continued to help the municipal market rally sending municipal yields to lows for the year," Dorian Jamison, municipal analyst at Wells Fargo Advisors, said in a weekly report.
As of April 28, the municipal bond market was up 4.6% year-to-date after declining 3.2% in 2013, as measured by the S&P National AMT-Free Municipal Bond Index, Jamison pointed out.
Yields of municipal bonds have come down at a faster clip than their counterparts in the U.S. Corporate bond markets, added J.R. Rieger, vice president of fixed income indices for S&P Dow Jones Indices, in a weekly report. Since the fourth quarter, the yield on investment grade municipal bonds tracked in the S&P National AMT-Free Municipal Bond Index have dropped to 87 basis points to 2.24%, while the S&P U.S. Issued Investment Grade Corporate Bond Index yield is at 2.82%, down 28 basis points.
Although the supply crunch has persisted for much of 2014, it has helped maintain price support and stability, traders agreed.
Municipals remained steady to stronger against a backdrop of economic and policy-related announcements that might have sent yields higher. On Friday, the unemployment report showed that the rate dropped sharply to 6.3% in April from 6.7% in March, lower than analysts' predictions of 6.5% to 6.7%.
Jamison noted that market indices showed that municipal bonds had only a muted initial reaction to Tuesday and Wednesday's Federal Open Market Committee meeting where plans were announced to cut the federal bond stimulus program by an additional $10 billion a month for a fourth straight month.
Muni yields rose just one to two basis points for maturities between two and 30 years following the meeting, traders reported.
In another deal planned for this week, the Successor Agency to the Inland Valley Development Agency will sell $260 million of tax allocation refunding bonds in two series - bonds not subject to the alternative minimum tax and federally-taxable securities. Both series will be priced by Barclays Capital on Tuesday and are rated A-minus by Standard & Poor's.
Jefferies LLC is expected to price $254 million of Jets Stadium Development LLC project revenue bonds with a weekly reset mode and a tentative final 2047 maturity. The bonds are taxable and have long-term ratings of Aa2 from Moody's and AA from Standard & Poor's, and short-term ratings of VMIG-1 from Moody's and A1 from Standard & Poor's.
A $195 million New Jersey Higher Education Student Assistance Authority financing will also be priced by Bank of America Merrill Lynch & Co. on Thursday following a retail order period on Wednesday. Bonds are subject to the AMT and are rated Aa2 by Moody's and AA by Standard & Poor's.
