Institutional buyers will get a shot at New York City's $900 general obligation deal on Wednesday, but its appetite won't be as strong as retail, traders said.
About a third of the paper is expected to be bought by retail investors, leaving an estimated $600 million for institutions, said a New York based trader. In its first day of marketing on Monday, retail bought $159 million. Results from Tuesday were not available.
Retail clamored over the headline deal, but interest from institutions is expected to be muted.
While there are many New York state-specific funds at mutual fund firms, New York City is such a frequent issuer that most buyers are "tapped out" and prefer to diversify with other New York-based deals, the New York based trade said.
"It's a high tax state so there's a lot of demand, which explains the state-specific funds," said the New York City trader. "In New York, people pay extra for the smaller deals, something like Westchester County, because they can't have all their eggs in one basket."
Tapping the market as frequently as once a month, New York City GOs lose their allure to the institutional buyer looking to market itself as a safe, diversified offering, a trader in the Midwest said. However, because it is still a recognizable name, it still picks up strong bids in the retail market.
The city's GO deal comes in two parts, comprised of $706.7 million fiscal 2015 Series A bonds and $193.3 million of Series B bonds, both with maturities ranging from 2015 to 2034, according to the deal's preliminary offering statement. On Monday, the $706.7 million tranche of the deal was priced for retail to yield from 0.97% with a 5% coupon in 2018 to 3.40% with a 5% coupon in 2034. There are sealed bids in 2016 and 2017.
Yields on the $193.3 million portion ranged from 0.97% with a 3% coupon in 2018 to 3.65% with a 3.50% coupon in 2034. There are sealed bids in 2015, 2016, and 2017.
