This week's new-issue activity in the municipal bond market will be led by a billion-dollar sale of non-investment grade transportation bonds from California and a trio of large high-quality deals in the Northeast.
The deals are part of an estimated $7.37 billion in volume coming to market, according to Ipreo and the Bond Buyer. Traders were relying on the $6.34 billion surge that was originally expected to arrive in last week's market to provide stability and help tighten spreads. Actual volume, as reported by Thomson Reuters, came in at $4.10 billion.
The San Joaquin Hills, Calif., Transportation Corridor Agency's $1 billion of revenue refunding bonds are "segregated from the rest of the market," because of their lower ratings, a New York trader said.
The Series A senior lien bonds and Series B junior lien bonds are rated BBB-minus and BB-plus by both Standard & Poor's and Fitch, respectively.
"There seems to be a lot of money in the high-yield space so for that bond there will be buyers," he said. "It's not going to be main-frame supply."
The deal is jointly managed by book runners Barclays Capital Inc. and Goldman Sachs & Co. The official sale date, structure, and other details were still being finalized on Friday as the issuer and underwriters continued an investor road show ahead of its planned arrival, according to a source close to the deal.
The preliminary structure calls for Series A to consist of current interest bonds, convertible capital appreciation bonds, and capital appreciation bonds, while Series B was tentatively only expected to include current interest bonds.
The trader said traditional investors will be more interested in the activity in the Northeast region, which will be led by a $700 million Massachusetts sale of general obligation consolidated bonds in the competitive market on Wednesday.
The deal is comprised of $500 million of tax-exempt debt in Series F, which is structured to mature from 2023 to 2031, and $200 million of taxable bonds in Series G, structured to mature from 2015 to 2019.
A $500 million sale of transportation revenue bonds is also anticipated from New York's Metropolitan Transportation Authority. The deal, which is being senior-managed by RBC Capital Markets, is expected to be offered in a retail order period on Wednesday before the official pricing on Thursday.
The bonds are rated A2 by Moody's Investors Service, AA-minus by Standard & Poor's, and A by Fitch.
A $368 million District of Columbia Water and Sewer Authority sale of public utility subordinate lien revenue refunding bonds is planned for pricing by Goldman on Tuesday or Wednesday, according to an underwriter at the firm.
The sale, which is rated Aa3 by Moody's, AA by Standard & Poor's and AA-minus by Fitch, is structured to mature with serial and term bonds.
Delaware will make an appearance this week with a $305 million GO sale that is expected to be priced by JPMorgan Securities LLC on Tuesday, following a retail order period on Monday.
The bonds, which are rated triple-A by all three major rating agencies, are structured as serials maturing from 2015 to 2034.
