WASHINGTON Aug 8 Two heavy-weight refunding
deals from the New York region will dominate U.S. municipal bond
issuance next week, which will likely total $6.97 billion,
according to Thomson Reuters estimates.
New York City will refund $900 million general obligation
bonds in a negotiated sale, with a two-day retail order
beginning on Monday and institutional pricing on Wednesday. Bank
of America Merrill Lynch will serve as lead underwriter on the
deal, which will be sold in two series of $700 million and $200
million and have maturities spanning from 2015 to 2034.
The city's credit is generally considered strong - Standard
& Poor's and Fitch Ratings both rate its general obligation debt
at AA and Moody's Investors Service rates it at Aa2.
At the same time, the Port Authority of New York and New
Jersey will bring a negotiated refunding deal of $833.79 million
to market with Citigroup as lead underwriter. The authority last
came to market in June.
Despite state and federal investigations related to the
"Bridgegate" scandal - where New Jersey Governor Chris Christie
allegedly engineered a traffic jam as political retaliation -
the authority is considered a solid credit.
Fitch Ratings has assigned the deal an AA- rating, citing
the authority's stable revenues and healthy financial
performance. But Fitch warned that the authority's massive $27.6
billion capital plan and possibly lower revenues could hurt the
Altogether, negotiated sales will total $4.78 billion next
week, with many large refunding deals expected, according to
Dalcomp. Michigan will refund $266.47 million state trunk line
fund bonds, with Citigroup as lead manager, and Harris County,
Texas, will refund $230 million road bonds, with Goldman Sachs
as lead underwriter.
The competitive calendar, estimated at $2.2 billion next
week, will also see some sizeable refunding deals. Minnesota is
expected to flood the market with $849.45 million in competitive
deals on Tuesday, including a $123.39 million refunding of
general obligation state trunk highway bonds. The state will
bring the largest competitive deal of the week to the market
that day with $438.06 million general obligation bonds.
For most of 2014, the $3.7 trillion municipal market has
suffered a dearth of refunding deals after interest rates began
rising late last year. In July, refinancing issuance totaled
$13.04 billion, down 29 percent from July 2013.
Still, rates have recently begun falling again, which could
make refunding attractive to issuers again.
On Municipal Market Data's benchmark scale, the yield on a
top-shelf 10-year bond was 2.19 percent on Thursday, which was
33 basis points lower than six months earlier and 54 basis
points lower than the same day in 2013.
The difference was even more striking for highly rated
30-year debt. The yield on the 30-year was 3.23 percent on
Thursday, 61 basis points lower than six months before and 105
basis points than a year earlier.
(Reporting by Lisa Lambert; Editing by Bernard Orr)