While Connecticut’s $600 million special tax obligation financing will top this week’s slate of primary market deals, an overall drop in supply may leave investors starved for paper after a rally last week that dropped municipal yields to three-month lows.
Long-term volume is expected to dip to an estimated $4.32 billion, according to Ipreo LLC and The Bond Buyer — a sharp decrease from the revised $7.43 billion actually sold last week, according to data from Thomson Reuters.
“The strong demand will follow through next week since there is less supply projected and no overhang from this week — and because the percentages to Treasuries are still relatively attractive,” said a New York trader, citing the $1.6 billion California general obligation sale and a $1.1 billion New York City Transitional Finance Authority revenue financing on Wednesday that were among the deals quickly snapped up.
That appetite was an indication that the market is holding its own, though it was the 22nd consecutive week that investors withdrew money from muni bond mutual funds and tax-exempt money market funds also continued to lose assets, he said.
“The deals came attractively priced and trade up nicely in the secondary market,” he noted. “It was a decent week for the Street in general. Investors had an opportunity to buy some fairly big deals and the participation was broad-based.”
This week, Siebert Brandford Shank & Co. will price the Connecticut transportation infrastructure financing on Wednesday following a retail order period on Tuesday. The firm was still ironing out the structure of the deal at press time. The bonds are rated Aa3 by Moody’s Investors Service and AA by both Standard & Poor’s and Fitch Ratings.
Goldman will also price the second and third largest negotiated deals of the week, including a $571.7 million offering of special revenue bonds on Tuesday from the Nevada Unemployment Compensation Fund, and a two-pronged remarketing from the New York Metropolitan Transportation Authority totaling $630 million scheduled for Wednesday. The maturity structures for both deals were being finalized weren’t available, a source at Goldman said Friday.
The Nevada bonds are triple-A-rated by all three major rating agencies, while the MTA deal is rated A2 by Moody’s and A by S&P and Fitch and will be offered to retail investors on Tuesday.
The MTA deal consists of $500 million of Series 2013E bonds to finance transit and commuter projects, while $130 million of Sub-Series 2008B-3 bonds will be remarketed from term-rate to fixed-rate mode on the Nov. 15 mandtory tender, as described in the preliminary official statement. The conversion does not affect the pledged revenues that secure the bonds.
Issuers hope last week’s tone continues when their deals come to market.
On Friday, the triple-A GO benchmark in 30 years ended down one basis point at a 4.07%, according to Municipal Market Data, on the heels of strong demand and a firmer tone that left the 10- and 30-year benchmark yields at record lows. Municipals followed Treasuries and strengthened early last week, extending a rally into Wednesday when the 10-year triple-A yield dipped four basis points to 2.53% — its lowest since hitting 2.48% on June 20, according to MMD. The 30-year triple-A yield also fell four basis points to 4.15% — its lowest level since Oct. 9, when it ended at a 4.14%.
Other large deals slated to come to market this week include a $300 million Colorado Health Facilities Authority revenue sale on behalf of SCL Health System. The deal, rated Aa3 by Moody’s and AA-minus by the two other major rating agencies and priced by Morgan Stanley & Co., comes to market Tuesday, following a retail order period on Monday.
The Gwinnett County, Ga., School District, will sell $211.3 million of GO bonds priced by Merchant Capital LLC with triple-A-ratings from Moody’s and Standard & Poor’s and structured to mature as serial bonds from 2014 to 2036.
Meanwhile, the District of Columbia is planning a $405 million sale of fiscal 2014 GO tax revenue anticipation notes in the competitive market on Wednesday.