In a true testament to the market's desperation for yield, this week's Rhode Island tobacco bonds are expected to be one of the highlights of a relatively light calendar.
While tobacco bonds are notorious for distress, traders expect the deal to be oversubscribed when it comes to market on Tuesday. The issuance will be one of the few high yield issuances of 2014 so far outside of Puerto Rico.
"All of the high yield guys are going to be all over this," said a New York based trader. "There's been barely anything for them to bite on so far this year."
While the lack of supply in the municipal market has been universal across sectors and regions, it's been particularly marked in high-yield sectors. The drought in high-yield has been so severe that the Invesco High Yield fund, one of the historically largest municipal high-yield funds, has closed its fund to new investors citing a lack of new paper to rotate within the portfolio.
"We can't find enough new supply in the marketplace," Mark Paris , who helps manage the fund, said in a telephone interview with The Bond Buyer.
The Rhode Island Tobacco Settlement Financing Corporation will issue $594 million of revenue bonds on Tuesday led by Citigroup Global Markets LLC. The deal is structured with serials and term bonds with maturities ranging from 2015 to 2049.
"The Rhode Island tobacco deal won't be for every type of buyer, but it will have yield," said a New York based underwriter in an interview.
Total primary volume for the week of August 4 will rise marginally from last week's sleepy $4.2 billion, but stay relative sparse at an estimated $5.81 billion, according to Ipreo and data collected by The Bond Buyer.
