Aside from an $800 million New York City general obligation refunding issue planned for Wednesday, there will be few large deals in the municipal market this week as approximately $5 billion in new issuance is expected on the heels of an equally-quiet end to last week.
Some municipal experts say the current supply is adequate for existing demand, while others say the situation could get worse -- especially approaching next weeks Memorial Day holiday when supply usually tapers off and the spring rollover season, when investors are flooded with June 1 and July 1 coupon and maturity payments that need to be reinvested.
Traders and analysts have said supply has been on the unusually-sluggish side in recent weeks due to market technicals.
Seasonally, this is a time when a fair amount of money comes into the market and typically get reinvested, said a New York underwriter. The market has a good tone because the new-issue calendar is manageable and I suspect that will continue through Memorial Day.
At the same time, however, there could be generally less price stability under heavier volume. The market would probably have a harder time holding the levels we are at if there was a fair amount of supply coming, but there doesnt appear to be a large calendar on the horizon, he said.
According to Ipreo LLC and The Bond Buyer, this weeks volume will hover around $5.10 billion. That compares to $5.42 billion of new volume that actually came to market last week. The total was about $1 billion shy of Thomson Reuters original $6.44 billion estimate.
The NYC GO deal will kick off the week with its two-day retail order period, which begins Monday ahead of the official pricing for institutions on Wednesday by book-running manager Bank of America Merrill Lynch.
The bonds are structured to mature serially from 2013 to 2028 and are expected to be rated Aa2 by Moodys Investors Service, and AA by both Standard & Poors and Fitch Ratings.
Overall, the city has $41 billion of GO debt oustanding. It sold $1.3 billion of GO debt in late February.. The final 2038 split maturity was priced with a 3.50% coupon and a 3.561% yield and a 4% coupon with a 3.45% yield. At the time, the triple-A-rated benchmark GO scale in 2038 was yielding 2.81%, according to Municipal Market Data.
Last Thursday, the same bond closed at a 2.85%, while the 30-year dropped three basis points to 2.95% following a week where yields were mostly steady and stronger, according to MMD.
Outside of New York, Californias Los Angeles Department of Water & Power plans to issue a two-pronged offering of power system revenue bonds totaling $480 million on Wednesday.
Goldman, Sachs & Co. will price the bonds after taking indications of interest on Tuesday. The deal consists of $452.14 million of tax-exempt bonds structured to mature serially from 2017 to 2032, and $27.85 million of taxable debt, which will mature in 2037. Both series are rated Aa3 by Moodys, and AA-minus by the two other major rating agencies.
Beyond the California water deal, negotiated issuance trails off, with most deals sized under $200 million.
Louisiana will sell $162 million of its GO refunding debt on Thursday, following a retail order period on Wednesday in a negotiated deal being senior-managed by Goldman. The bonds are rated Aa2 by Moodys and AA by both Standard & Poors and Fitch.
Volume is not expected to be any better in the competitive market, where a $216.65 million sale of Prince Georges County, Md., public improvement bonds is the largest deal on tap. Slated for pricing on Tuesday, the bonds are structured to mature from 2014 to 2033 and are expected to retain their existing natural triple-A ratings from all three major rating agencies.
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