Volume Jumps to $8.25 Billion With Big Cal GO Deal on Deck

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A $1.61 billion California various purpose general obligation offering will headline the primary market this week and contribute to the more than $8 billion of new supply, as volume nearly doubles from last week.

According to Ipreo LLC and The Bond Buyer, issuers are scheduled to bring an estimated $8.25 billion of long-term financings to market, on the heels of a revised $4.38 billion that was actually priced last week, according to Thomson Reuters.

The California sale, which is expected to be priced on Tuesday by JPMorgan Securities after a retail order period on Monday, should be in high demand among both retail and insititutional investors, who consider it one of the state’s preferred credits, according to Cap Harlan, vice president of municipal trading at Wedbush Morgan Securities headquartered in Los Angeles.

“It’s a very liquid credit in the market and people are comfortable with the name, so it usually gets pretty good demand,” he said of the bonds, which are expected to be rated A1 by Moody’s Investors Service and A by Standard & Poor’s and Fitch Ratings.

“I have brokers who will buy nothing but Cals,’’ he continued. “It’s always a good name with retail,” Harlan said, adding that he expects the new deal to be priced to sell, especially given the lighter than usual volume in the state lately.

“Supply has been spotty and this will be welcome,” he said. Overall, he said new deals pricing next week should benefit from an improving tone in the market following resolution of the government shutdown and plans to raise the debt ceiling through February.

On Friday, the benchmark, triple-A GO scale in 2043 ended at a 4.22%  yield, unchanged for the week, according to Municipal Market Data. The 30-year ended lower by four basis points at 4.22% the prior day as municipal followed Treasury yields lower.

“The market does feel better and has felt better for a few days,” Harlan said.

The larger portion of the California deal consists of  $707.7 million of new-money various purpose GO bonds maturing serially in 2014 and from 2019 to 2023 and in 2032 and 2043. The $659.5 million of various purpose GO refunding bonds are structured to mature 2014 to 2032, while an additional $246 million of GO bonds for school facilities matures in 2029.

An additional $450 million series of put bonds will mature in 2017 and 2018, and will have the same ratings as the various purpose bonds, however it will be priced on Tuesday by Citi.

The New York City Transitional Finance Authority tentatively plans a 650 million sale of future tax secured subordinate bonds for pricing on Wednesday by Goldman, Sachs & Co. following a two-day retail order period on Monday and Tuesday. The bonds are rated Aa1 by Moody’s and AAA by Standard & Poor’s and Fitch.

Also on tap this week is  a multi-state financing on behalf of Catholic Health Initiatives, the largest of which is a $601.75 million revenue sale slated to be priced by Morgan Stanley & Co. on Wednesday. That portion of the deal includes $243.44 million issue by the Colorado Health Facilities Authority; $81.54 million from the Kentucky Economic Development Finance Authority; $205 million issued by the Health, Educational and Housing Facility Board of the City of Chattanooga, Tenn; and $71.58 million from the Washington Health Care Facilities Authority.

Separately, Morgan Stanley will price s a $71.48 million series for Catholic Health on Wednesday. The smaller financing consists of $19.34 million issued by the Colorado health authority; and $25 million and $27.14 million both from Montgomery County, Ohio.

All the bonds for Catholic Health are rated A1 by Moody’s, and A-plus by Standard & Poor’s and Fitch.

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