A $700 million Denver Airport System financing and a $634 million California Health Facilities Financing Authority sale will dominate the primary market this week as more than $6 billion greets investors returning from a long holiday weekend — some of whom may or may not be ready, willing, and able to reinvest July 1 cash after increased volatility on Friday.
The market lost some of its firmer footing when the 30-year benchmark Municipal Market Data general obligation scale ended at a 3.95% after the better-than-expected jobs announcement that showed June payrolls rose 195,000 and unemployment for the month remained at 7.6%.
Previously, the market had ended unchanged at 3.83% for five consecutive trading sessions -- which was down from 3.91% on June 26, according to MMD.
Investors were expected to receive an estimated $37.23 billion in redemption proceeds last Monday, but traders and underwriters said many delayed reinvestment decisions due to the holiday-shortened week that brought with it sluggish supply, apprehension over the June employment report on Friday, and overall investor anxiety about market conditions on the heels of a recovery from the worst three-day selloff in a quarter century.
While traders looked forward to the $6.85 billion of volume expected by Ipreo LLC and The Bond Buyer this week, they said volatility following the jobs report is in contrast to last week’s stability and could delay investors from spending available reinvestment cash further.
Last week, Thomson Reuters reported a revised $2.32 billion of supply crept into the market as issuers, underwriters, and investors headed home early for July 4th celebrations and a chance to recuperate from recent market volatility.
Ed Meadows, a municipal trader at Oppenheimer & Co. in Chicago, said last week’s sluggishness may linger into this week, but that could be offset by the fact that, prior to Friday’s weakness, the market had a steady tone in recent trading sessions that piqued investors’ interest.
“Some deals are still day to day, so it’s hard to say what’s going to come” Meadows said last Wednesday. “It’s been pretty quiet the past few days with people taking a break -- not only for the holiday, but waiting to see what happened with the job number on Friday,” he added.
In an otherwise quiet week, he said the $381.23 million Bi-State Development Agency of the Missouri-Illinois Metropolitan District combined lien mass transit sales tax appropriation refunding had fairly aggressive retail demand.
“It didn’t have a lot of competition, so it was well spoken for,” Meadows said. The double-A-rated 4 ¾% coupon bonds due in 2052 were priced to yield 4.79% at the final pricing.
In addition, a $659.7 million refunding from the Louisiana Tobacco Settlement Financing Corp. came to market on Tuesday — after originally being postponed due to the selloff — to avoid a turbulent market on Friday with the release of the job numbers. The final 2035 maturity was priced at par with a 5.25% coupon.
This week, the Denver airport deal will test the post-holiday market on Monday when Citi prices the subordinate lien bonds on Monday on behalf of Denver International Airport in two series: $338 million of revenue bonds subject to the alternative minimum tax and $396 million of tax-exempt bonds. The bonds are rated A2 by Moody’s Investors Service and A by Standard & Poor’s and Fitch Ratings.
It will be joined by a $409 million sale of joint airport revenue refunding bonds from the cities of Dallas and Forth Worth, Texas, which is expected to be priced on Thursday by Loop Capital Markets on behalf of the Dallas-Forth Worth International Airport. The bonds are rated A2 by Moody’s, A-plus by Standard & Poor’s, and A by Fitch Ratings.
Meanwhile, Morgan Stanley & Co. will price the California health care deal behalf of St. Joseph’s Health System. The bonds are rated A1 by Moody’s and AA-minus by the two other major rating agencies.
Other large deals include $425 million of senior revenue refunding bonds from the Illinois State Toll Highway Authority priced by Goldman, Sachs & Co.; $370 million of Austin, Tex., water and wastewater system revenue refunding bonds priced by JPMorgan Securities; and $336 million of tax-exempt and taxable new-money and refunding GO bonds from Mount San Antonio Community College District in Los Angeles County pricing on Wednesday by RBC.