Volume will slow this week due to the observance of Veteran's Day as deals from California and New Jersey head to a market that weakened after Friday's stronger-than-expected employment report.
According to Ipreo LLC and The Bond Buyer, issuers are expected to price an estimated $5.03 billion in long-term issuance in the holiday-shortened week due to Monday's bond market close. The new supply compares to the revised $6.33 billion that was actually priced last week, according to Thomson Reuters, and arrives ahead of the highly-anticipated $1.7 billion Jefferson County, Ala. sewer warrant bankruptcy exit plan next week.
"The scale is up quite a bit today and it definitely feels weaker," said a New York trading manager at a Wall Street firm on Friday when the 30-year triple-A general obligation scale ended at a 4.15% — up seven basis points from Thursday — on news from the Bureau of Labor Statistics that the economy added 204,000 jobs in October. The 30-year Treasury benchmark yield rose 10 basis points to 3.82% Friday morning.
"I think the number caught the market by surprise and what happens when something like this takes place is everyone just puts their tail between their legs and gets out of here for the long weekend," the New York trader said.
A New York underwriter on Friday recapped the "relatively quiet" week by saying the lack of supply gave deals the attention they needed to get done, but couldn't predict how the reaction from the jobs report will follow through with this week's pricings -- such as the $625 million California State Public Works Board revenue offering on Thursday.
"New issues were well received and there wasn't a ton of supply, so that certainly helped," he said on Friday. "We didn't have big pricing pressure."
The California sale of lease revenue bonds for various capital projects will be offered to retail investors Wednesday before Thursday's official pricing led by joint book-runners RBC Capital Markets and Goldman, Sachs & Co.
The bonds are rated A2 by Moody's Investors Service, and A-minus by Standard & Poor's and Fitch Ratings. The deal will be followed by a $375 million New York City Municipal Water Finance Authority water and sewer system second general resolution revenue sale slated for Wednesday, after a one-day retail order period.
The fixed-rate new-money deal will be led by senior book-runner M.R. Beal & Co. Moody's rates the bonds Aa2, while the two other major rating agencies rate it AA-plus.
Elsewhere in the Northeast, a $298.41 million New Jersey Building Authority revenue sale is slated for pricing by Morgan Stanley on Thursday after a one-day retail order period on Wednesday. That deal consists of $47.85 million of revenue bond anticipation notes; $240 million revenue refunding bonds; and $10.33 million of taxable revenue refunding bonds.
Switching to the Southeast, the Virginia Department of Transportation is gearing up for the sale of $277.68 million of federal grant anticipation revenue bonds, which are rated Aa1 by Moody's and AA by Standard & Poor's. Bank of America Merrill Lynch plans to price the offering on Wednesday, after a retail order on Tuesday.
In other activity, a $321.1 million Montgomery County, Md., consolidated public improvement GO sale will include $295 million of Series A debt whose proceeds will be used to refinance its Series 2009 and Series 2010 commercial paper bond anticipation notes. Proceeds from the $26.1 million Series B will refund Series 2004A and Series 2005A.
Looking ahead, the New York underwriter noted that while the planned Jefferson County deal next week will certainly "bring its share of attention," he doesn't expect it to hamper general market activity.