WASHINGTON Feb 21 Next week will feature three
large and atypical sales of U.S. municipal bonds, as a drought
of primary issuance stretches on with only $2.87 billion in new
debt coming to market, according to Thomson Reuters estimates.
The largest deal will be taxable, a $270 million tax
allocation refunding sale from the successor agency to the
Inland Valley Development Agency in southern California. The
sale, for which Barclays Capital will serve as lead underwriter,
tops a negotiated calendar totaling $1.77 billion.
The second-largest negotiated sale also comes from
California. The state's school cash reserve program authority
will sell $200 million tax and revenue anticipation notes
through Piper Jaffray & Co.
The authority is unusual in the realm of school finance - it
was created in 1978 when California's Proposition 13 eliminated
school districts' use of general obligation bonds. Even though
general obligation debt was restored in 1986, more than 200
school districts and other education agencies pool their
borrowing through the authority's twice yearly note sale.
In a twist, the largest tax-exempt issue next week is on the
competitive calendar, a $225 million general obligation issue
from Delaware scheduled to price on Thursday. The competitive
calendar, where investors typically bid on very small deals,
will total $1.1 billion.
Rising interest rates and lucrative stock market returns
pushed some investors from the U.S. municipal bond market in the
second half of 2013, while financial troubles in Detroit and
Puerto Rico sent others running for the exits.
The market has recently stabilized. The investment-grade
part of the market has returned 2.55 percent for the
year-to-date, according to S&P Dow Jones Indices. Yields on the
S&P National AMT-Free Municipal Bond Index have fallen 58 basis
points, as well, to end on Thursday at 2.53 percent.
Still, primary issuance remains low, mostly as refinancing
dries up. As interest rates rose at the end of 2013, most
issuers found they could no longer save money by refinancing