Morgan Stanley is expected to price Wednesday the $350 million Houston independent school district variable rate limited tax schoolhouse bond deal, the largest of the sparse week, and investors believe it will be in high demand.
Investors predicted the deal will go well for the issuer because scheduled volume is low. Issuance is expected to total $2.23 billion for the week, according to data provided by The Bond Buyer and Ipreo.
Traders said demand for the deal will be increased because triple-A Texas credits are highly desirable.
"The bonds are a strong credit, you always know Texas ISD bonds will do well because they're backed by the Texas PSF," a trader in New York said.
A trader in Chicago did say yield would be hard to find this week, since the top issuances going to market are all highly rated.
"Everything is triple-A, everything is California, and all the California funds and residents there are trying to get that paper on their portfolio," he said. "I'm going to sit this week out."
The retail order period for the second largest deal of the week the three-part $339.95 million Los Angeles Harbor Department revenue refunding issue is scheduled to start on Wednesday. Well Fargo Securities is scheduled to price the bonds that are coming in $205.7 million, $89.5 million and $44.75 million parts. The deal includes both AMT and non-AMT bonds.
Even though the bonds do not have triple-A ratings, traders believe the credit's association to California will help its sale.
"California paper has traded very well over recent months, my expectation is if it's priced, it will get a substantial amount of demand," a second trader in New York said.
The L.A. Harbor bonds earned ratings of Aa2 from Moody's Investors Service, and AA from Standard & Poor's and Fitch Ratings.
The bonds are scheduled for institutional sale on Thursday.
The $117 million San Mateo County, Calif., Community College District general obligation refunding bonds are expected to price on Thursday by Morgan Stanley. The bonds are triple-A rated. The second trader in New York does not expect the L.A. Harbor sale to interfere with the San Mateo County deal because investors are so hungry for California paper these days.
A third trader in New York said even though the "skeleton desks" from last week are starting to be filled by market participants returning from vacation, people are still out of the office.
"The story of the week is nothing is going on," he said.
