WASHINGTON, March 28 New sales in the U.S.
municipal bond market will continue to shrink next week, even
with the University of California issuing nearly $1 billion in
Thomson Reuters data shows that municipal bond sales will
total $3.94 billion next week, compared to a revised $5.15
billion this week. Almost all of that, $3.17 billion, will be on
the negotiated calendar.
The largest sale of the week, set for Thursday, is $968.24
million in tax-exempt and taxable debt from the Regents of the
University of California, with Wells Fargo Securities acting as
lead underwriter. More than half of the deal, $559.5 million,
will be tax-exempt.
The higher education system's negligible operating margin
led Fitch Ratings to cut its credit score last month to AA from
AA-plus. The University of California institutions were long
considered a point of pride in the Golden State, but
California's years-long budget battles caused funding for the
system to fall and its operations to suffer.
The competitive calendar remains thin next week, dominated
by a Wednesday sale of $120 million for the Lancaster County
School District in Nebraska.
At the beginning of this month, the U.S. municipal bond
market was flooded with $3.5 billion in Puerto Rico bonds, the
largest municipal junk bond sale ever. But for most of 2014, new
issuance continued to run light, as rising interest rates make
borrowing and refinancing unattractive. The amount of
outstanding debt fell to $3.671 trillion at the end of the 2013,
the smallest amount in five years.
Still, interest rates have dropped lately, which could lure
some issuers back to market or entice them to borrow more than
they had planned. From Monday through Thursday the yields on
top-rated 10-year bonds fell 7 basis points on Municipal Market
Data's benchmark scale to 2.47 percent. Those on highly rated
30-years dropped by even more, 11 basis points, to 3.61 percent,
according to MMD, a Thomson Reuters company.
The largest deal of this week, Atlanta's airport refunding
bonds, grew to $846.49 million from the originally planned
$705.6 million. Likewise, on Tuesday the New York City Municipal
Water Finance Authority increased its planned sale of $484.42
million in bonds to $547.85 million. It also cut yields in many
maturities, by as much as 3 basis points.
(Reporting by Lisa Lambert; Editing by Leslie Adler)