NY's MTA sale tops light week for munis

NEW YORK Fri Feb 14, 2014 2:41pm EST

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NEW YORK Feb 14 (Reuters) - U.S. municipal bond sales are expected to total $2.2 billion next week, extending a run of light issuance that stretches back into the final weeks of 2013.

The dollar amount of new deals coming to market in the holiday-shortened week includes $1.5 billion worth of negotiated deals, topped by $400 million of revenue bonds from New York's Metropolitan Transportation Authority, according to Thomson Reuters estimates.

Some $660 million of competitive deals are also scheduled.

As of Friday, issuance in 2014 has totaled $26.4 billion, according to Thomson Reuters data, 29.5 percent below the same period last year and the lowest year-to-date total since 2011.

The light volume comes after a tough year for the market. Nearly $63 billion fled municipal bond funds in 2013 as investors were spooked by rising interest rates and Detroit's bankruptcy filing.

But demand has started to bounce bank in recent weeks. High-yield municipal bond funds have led the way, posting five straight weeks of net inflows.

The MTA, the biggest transportation network in North America, is raising money to finance transit and commuter projects with next week's sale, which is expected to price through Morgan Stanley.

Moody's Investors Service noted late last year that the agency's recent success in reducing operating costs was positive for its revenue bonds, which are rated A2.

The negotiated calendar also includes a sale of $201.68 million of Louisiana state highway improvement revenue bonds, expected to price on Wednesday through Citigroup and a $156 million sale of Georgia Housing and Finance Authority bonds slated for Tuesday. Most of the Georgia bonds - $120 million - will be tax-exempt.

Volume will likely get a boost in the coming weeks as cash-strapped Puerto Rico prepares to sell up to $3.5 billion in general obligation bonds. The deal could be the largest ever offering of general obligation junk bonds.

All three major U.S. ratings agencies downgraded the U.S. territory, which has some $70 billion in debt, to junk-bond status this month, citing the island's weak economy, high debt load and doubts about its ability to meet its obligations and raise new money in the market.

Barclays, Morgan Stanley and RBC Capital Markets will be lead underwriters on the deal, the timing of which has yet to be determined.

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