April 11 (Reuters) - U.S. municipal bond sales will slump to $2.4 billion next week as the market closes for the Good Friday holiday, the lowest level since early January and well down from around $4.3 billion this week, according to Thomson Reuters estimates on Friday.
Far fewer new bonds have come to market this year. That has helped munis recover some of their losses from last year while lifting the market to one its three best first-quarter returns in the last two decades. Issuance was 26 percent to $60.3 billion in the first quarter.
Eric Friedland, head of municipal research at Schroders Investment Management, said municipalities have cut back on new issuance this year because of defered capital expenditure and the unpopularity of issuing new debt. With interest rates poised to increase, there is a lack of refunding, he said.
“Low volume has pretty much been the story for the entire year,” said Friedland. “In the past week, with new issues coming to market, the orders have been over-subscribed.”
Next week’s competitive calendar totals about $1.3 billion, with the negotiated sales estimated to total $1.1 billion. New issuance will be the lowest since the week ended Jan. 11, when $2.2 billion of new bonds were issued.
New Jersey Educational Facilities Authority (NJEFA) will issue $197.5 million of revenue and refunding bonds, which are secured by payments from the state. The proceeds will fund capital improvements for public and private higher education institutions and refund some outstanding bonds.
The deal comes after Standard & Poor’s downgraded New Jersey to A-plus from AA-minus this week, citing a structurally unbalanced budget, partially funded pension obligations, significant retiree healthcare obligations, and a lot of debt. New Jersey joins Illinois and California as the only states rated in the A category.
The tax-exempt sale, for which Raymond James & Associates, Inc will serve as lead underwriter, was rated A-plus with a negative outlook by Fitch Ratings.
In an unusual twist, the largest issue next week is a competitive deal, a tax-exempt $321 million general obligation refunding issue from North Carolina scheduled to price on Wednesday. Those bonds are structured with maturities from 2015 to 2025, according to the preliminary official statement. All three ratings agencies gave the bonds a triple-A rating.
The second-largest sale hails from the Massachusetts Bay Transportation Authority (MBTA) on the negotiated calendar. The authority will sell $200 million of tax-exempt senior sales tax bonds through Barclays Capital. Proceeds will be used for capital improvements, according to Moody‘s. Moody’s assigned the bonds an Aa2-rating with a stable outlook.
The bond market will be closed next Friday in observance of the Good Friday holiday. (Reporting by Robin Respaut and Edward Krudy; Editing by Richard Chang)