Muni bond issuance drops to $5 bln next week
April 25 (Reuters) - U.S. municipal bond sales will drop to $5 billion next week, down from around $8 billion this week, according to Thomson Reuters estimates on Friday.
This week's issuance was unusually high and the drop still sets next week up to beat this year's weekly average of approximately $4.5 billion. This year has seen lower issuance levels, a factor that has helped the market recover some of its losses from last year when average weekly issuance was around $5 billion.
Pennsylvania was set to issue nearly $835 million in general obligation debt. Moody's assigned a relatively weak Aa2 rating to the bonds, citing the state's below average financial position and its growing and substantial unfunded pension liability. Fitch assigned a AA rating with a negative outlook.
Pennsylvania's financial position remains below average, Moody's concluded, due in significant part to the expectation that its unfunded pension liability and moderate growth will continue to leave it struggling to balance its budget.
The state pays one of the highest premiums to borrow on the nearly $4 trillion municipal bond market, with investors asking a quarter of a percentage point over the yield on top-rated muni bonds to lend to the state.
The state is slated to sell $289.5 million of refunding general obligation bonds and $545 million first series GO bonds on or about April 29, through competitive bid.
Fitch said its AA rating reflected the state's "significant financial challenges", including its failure to adequately fund its public pensions and the lack of a healthy reserve fund.
Another large deal is a combined $565 million sale of highly rated Stanford University bonds by the California Educational Facilities Authority. The sale includes $290 million of tax-exempt revenue bonds and $150 million of taxable bonds.
The Michigan Finance Authority will issue $440 million of hospital refunding bonds for the state's City of Royal Oak Hospital, led by Morgan Stanley.
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