Municipal volume is forecast to plunge in the week ahead, with no negotiated deals bigger than $209 million and only eight issues larger than $100 million.
Total volume is estimated at $3.98 billion, according to Ipreo and The Bond Buyer. That is down from the $7.64 billion sold this week, according to Thomson Reuters. The total is comprised of $2.74 billion of negotiated deals and $1.23 billion of competitive sales.
"We are a little surprised that the higher volume sustained itself and not surprised to see the drop off," said Dan Heckman, senior fixed-income strategist at U.S. Bank. "We think it will help make the market an attractive entry point, as some buyers have been hesitant and siting on the sidelines with the huge amount of supply we have had."
Issuance so far in 2015 has been primarily driven by refundings. Heckman also believes refundings are playing into the decline in weekly issuance.
"A reduction in refundings plays a role in lesser issuance as we get into the middle part of the summer," Heckman said. "Later this year bonds will be hard to come by, a healthy fundamental sign for the market to create a better bid," he said. "It's hard to tell but we expect this drop off will sustain for a few weeks at least."
Simon Neilson, SVP/Manager Fixed Income Sales & Trading at HSBC Securities believes that the drop off is a reflection of market conditions.
"We have seen rates climbing a little bit and I think it's a case where people jammed deals in the past few weeks and now they are backing off a bit," said Neilson. "We saw decent sized deals the past few weeks and they feel as though they got in what they needed to get in. Things could definitely change with how the rates are going from today, things are more expensive now and I wouldn't be surprised to see a slight uptick from now until the end of next week."
On April 28 and 29 there is a meeting of the Federal Open Market Committee that could be a factor in creating market hesitancy amid the uncertainty of interest rate direction.
"The only thing I can think of right now is the schedule Fed meeting next week," said Chris Mauro, director, municipal bond research at RBC Capital Markets. "But historically they haven't resulted in these types of swing in volume."
The biggest deal on the upcoming negotiated calendar is a $209 million sale from the Grossmont Healthcare District in California. Goldman, Sachs is scheduled to the price the general obligation bonds on Tuesday. The GOs are rated Aa2 by Moody's Investors Service.
The largest sale in the competitive arena will be the Humble Independent School District, Texas' $218.01 million offering of Series 2015A unlimited tax school building and refunding bonds. The deal is backed by the Texas Permanent School fund guarantee and rated triple-A by Moody's and Standard & Poor's.
The last time the district sold bonds competitively was on April 10, 2007, when Prager Sealy won $25 million of Series 2007A unlimited tax school building bonds with a true interest cost of 4.6243%.
The only other notable competitive issued expected next week is $94.925 million of refunding revenue bonds from Pennsylvania Higher Education Facilities Authority for the State System of Higher Education Series AQ. The deal is rated Aa3 by Moody's.
The authority last came to market on April 22, 2014, when Robert W Baird won $46.825 million with a true interest cost of 2.3396%.
Seven of the top eight deals in terms of amount will come on Tuesday, when Bank of America Merrill Lynch is expected to price the public power generation agency's $169 million of revenue refunding bonds for the Whelan energy center unit 2 in Nebraska. The deal is rated A2 by Moody's, triple B-plus by Standard and Poor's and A-minus by Fitch Ratings.
RBC Capital Markets is scheduled to price the Tennessee housing development agency's $162.250 million of housing finance program bonds, issue 2015-A on Thursday. The deal is rated Aa2 by Moody's.
BOSC, Inc., Richardson is expected to price the northwest independent school district's in Texas $137.618 million of unlimited tax refunding bonds, series 2015A on Tuesday.
JPMorgan Securities is slated to price the New Hampshire health and educational facilities authority's $110 million of revenue bonds for the University system of New Hampshire, Series 2015 on also on Tuesday. There will be a retail order period on Monday and it is expected to mature serially from 2016 to 2045. The deal is rated Aa3 by Moody's and A-plus by S&P.
