Buyers of municipal bonds will see a sale this week that offers some high yields in return for taking on some additional risk not usually associated with typical deals. California’s Golden State Tobacco Securitization Corp. is issuing a $1.7 billion tobacco bond deal consisting of serials and turbo terms.
Coming off the primary market's most robust week of issuance this year, investors will see more than $6 billion hit the calendars this week – with almost a third of that issuance coming from one well-known California issuer.
While low volume is frustrating for investors, scarcity is driving demand as buyers have realized they cannot wait for something that will not come. Although this week lacks a large deal, it is full of medium sized deals from a variety of issuers.
The Federal Open Market Committee meets this week, which means a light primary market calendar of $4.3 billion. With year-over-year core PCE seen at or near 2%, its statement will acknowledge rising inflation.
A $1.4 billion sale from New York Transportation Development Corp., for Delta’s redevelopment at LaGuardia Airport is the bellwether deal of a near $8 billion week of new issuance. This will mark the first time in six years that Delta has issued in the tax exempt market and will be the second largest airline special facility bond ever completed in the municipal market.