NEW YORK, March 14 (Reuters) - U.S. municipal bond sales are expected to revert to recent form next week, with a slender $3.29 billion in new issuance on tap, according to Thomson Reuters estimates on Friday.
That's a steep falloff from the nearly $12 billion sold this week, according to the most recent data, including a sale of $3.5 billion of Puerto Rico general obligation bonds.
"We had such a surge in issuance last week, so maybe the market is taking a pause here," said Randy Smolik, a senior analyst at Municipal Market Data, a division of Thomson Reuters.
This week's calendar was dominated by the Puerto Rico sale and a $1.8 billion offering from California. But so far in 2014, bond sales by states, cities and other issuers in the municipal bond market have been meager. February's $14.1 billion was the lowest issuance in three years.
March issuance totaled almost $17 billion through Friday, but year-to-date issuance was down some 25 percent.
About $2.5 billion will come next week as negotiated deals and about $760 million will be competitive deals.
The biggest is a $393.6 million Wisconsin transportation revenue bond sale pricing through Jefferies on Thursday. Nearly $311 million of new bonds are structured with serial maturities from 2015 through 2034 and $82.67 million of refunding bonds mature in 2016 through 2021, according to the preliminary official statement. The refunding bonds also have a forward delivery date of April 2, 2015.
Topping the competitive calendar are deals from top-rated issuers Howard County, Maryland, and Oklahoma City, both of which could attract sizable interest, Smolik said.
Howard County will sell $142.8 million of bonds in a three-part deal on Tuesday, consisting of $120.4 million of general obligation consolidated public improvement and refunding bonds, $1.52 million of taxable bonds and $20.8 million of metropolitan district project and refunding bonds. Oklahoma City has scheduled a two-part deal consisting of $92.2 million of tax-exempt and $15 million of taxable GO bonds also on Tuesday.
The supply vacuum has pushed yields on municipal bonds lower in recent weeks. Even Puerto Rico's new junk-rated GO bonds, which priced with a 8.73 percent yield on Tuesday, rallied in busy secondary market trading this week. The sale attracted more than $16 billion in orders, the island's Treasury said.
Smolik said the new deal calendar usually starts to get fuller in March but said this year has been "atypical."
"There might be some budgetary restraints for some municipalities, though states are generally in better economic shape this year," he said.
Fear of rising interest rates also pushed a number of municipalities to refund outstanding debt last year, Morgan Stanley strategists John Dillon and Matthew Gastall wrote in a note to clients. Refundings were down almost 63 percent last month compared with the same period last year, they wrote.
"Interestingly enough, it does appear as if volatile weather throughout the country's major metropolitan areas played a role in rescinding primary market activity," they added, as underwriters feared bringing deals to distracted investors.