(The Bond Buyer) – House Ways and Means Committee chairman Sander Levin Wednesday introduced a new bill that enables Congress to make another attempt at extending several bond provisions slated to expire at the end of the year, including Build America Bonds.

The Investing In American Jobs and Closing Tax Loopholes Act — HR 5893 — would extend BABs for two years, along with other extensions to temporary bond provisions first enacted in the American Recovery and Reinvestment Act of 2009.

The bill “is about moving forward to create opportunities for Americans in America using job-creating programs such as the Build America Bonds,” Levin, a Michigan Democrat, said in a statement. “Experts have deemed these bonds, which helped support nearly two million jobs, to be one of the most successful recovery efforts in place. Republican and Democratic governors alike have praised these programs.”

House Democrats plan to bring the bill straight to the House floor and hope to pass it before Congress breaks for a month-long recess beginning Aug. 9, according to sources. The Senate would then take up the measure after the break.

The House previously passed a bill extending temporary bond provisions, but it ground to a halt in the Senate after Democrats were unable to garner 60 votes on the package to block a filibuster threatened by Republicans. The bond provisions were eventually stripped from that bill, but have found a new home in Levin’s measure.

The legislation would gradually reduce the subsidy rate for BABs from the current 35% level to 32% for bonds sold in 2011, and 30% for those sold in 2012.

“National League of Cities is certainly pleased that the chairman has recognized … that these important provisions need to be extended,” said Lars Etzkorn, program director of the NLC’s center for federal relations.

The NLC was one of six groups that sent a letter earlier this month to senators urging them to pass a BAB extension, saying the program has provided critical assistance to state and local governments during times of extraordinary budgetary pressures. Issuers have sold nearly $120 billion of the securities since passage of the ARRA last year, according to data from Thomson Reuters.

Levin’s bill also includes an extension to another muni provision that encouraged banks to buy more tax-exempt debt from smaller issuers. It would extend by one year, through 2011, the greater small-issuer exemption for bank-qualified bonds.

The ARRA modified the tax law to allow banks to deduct 80% of the costs of buying and carrying tax-exempt debt sold by borrowers whose annual issuance is no greater than $30 million, up from $10 million. It also allowed for the $30 million limit to be applied to individual borrowers participating in conduit deals, rather than at the conduit-issuer level.

“We appreciate and welcome chairman Levin’s leadership in continuing to emphasize the relationship between municipal finance liberalization, stimulus and jobs,” said Charles Samuels, a lawyer with Mintz Levin Cohn Ferris Glovsky & Popeo PC and counsel to the National Association of Health and Educational Facilities Finance Authorities. “Nonprofit education and health continue to need access on reasonable terms to the capital market.”

Susan Gaffney, director of the Government Finance Officers Association’s federal liaison center, also threw her support behind the bank-qualified debt provision, saying it is “vital for smaller local governments to be able to issue debt efficiently and in a cost-effective manner.”

The bill also would extend for one year the programs for recovery zone economic development bonds and recovery zone facility bonds. It would also allocate an additional $10 billion and $15 billion to the programs, respectively. And the bond authority would be allocated using a new formula that would guarantee each locality receives a minimum allocation equal to at least its share of national unemployment as of December 2009.

The bill also would extend for one year, through 2011, the exemption from the alternative minimum tax for all private-activity bonds, including those issued to refund debt sold after 2003. It also would exempt water and sewer exempt-facility bonds from state volume caps for PABs, and allow Federal Home Loan Banks to guarantee tax-exempt bonds through 2011.

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(Bloomberg) – Columbus, Ohio, the capital whose borrowings are rated one level above the state’s, sold about $430 million in AAA debt that included more than $266 million in Build America Bonds, the week’s second largest such offer.

Ten-year general obligations were priced to yield 3.4 percent, according to a person familiar with the deal, which is 25 basis points higher than $325 million in bonds issued earlier this month by comparably rated Montgomery County, Maryland. A basis point is 0.01 percentage point.

Columbus may have paid a premium because the largest sections of the five-portion deal may not qualify for inclusion in indexes, said Anthony Shields, a principal in the public- finance department at Williams Capital Group in New York.

“Because there are so many parts, there’s no benchmark, and that actually hurts the deal rather than helps them,” Shields said. “A lot of people who buy the BABs want to buy the bonds that are in an index,” he said, referring to the Build America segment.

The Build America Bond program, under which the federal government pays 35 percent of the interest costs of taxable bonds sold to pay for public works projects, was created last year as part of President Barack Obama’s economic-stimulus package to help ease borrowing by state and local governments. The program was set to expire at the end of 2010, but a bill was introduced yesterday in the U.S. House to extend it two years.

“We’ll probably end up close to a 50/50 split between tax- exempts and taxables,” said Steve Wentzel, Columbus’s debt management specialist. Final pricing information won’t be available until today.

Municipal Boon

Build Americas have been a boon for state and local governments, which have sold about $124 billion of the securities. They also have been a plus for investors, according to Justin Hoogendoorn, a bond strategist at BMO Capital Markets in Chicago.

“What we’re telling clients is that BABs and the broader municipal market in general are very favorable compared with corporates right now,” Hoogendoorn said. “Ohio paper is definitely pricing wider than the overall market, but with Columbus, I wouldn’t expect them to have too many problems with pricing on the deal.”

This month, top-rated taxable municipal securities have returned more than triple the rate of comparable corporate bonds, according to indexes compiled by Bank of America Corp.’s Merrill Lynch & Co.

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(The Bond Buyer) – A draft bill released by House Ways and Means Committee chairman Sander Levin late Monday would authorize over $5 billion in new bond authority for renewable energy projects and open the door for private-activity bonds to be used by states and localities to finance energy-efficient upgrades to residential homes.

The bill does not include highly sought extensions of several high-profile bond programs that were authorized by the American Recovery and Reinvestment Act — including Build America Bonds.

But that’s no reason to panic, according to sources and market participants, who remain optimistic that lawmakers will take another crack at legislation extending BABs and other expiring tax-law provisions during the coming weeks.

BABs were excluded from the energy bill primarily because they are not energy-related, a congressional source said.

The House had approved a two-year extension for BABs in jobs legislation it passed last month. But the BABs and other bond program and tax law extensions were carved out of the legislation after lawmakers in the Senate failed to garner enough votes to limit debate and avoid a filibuster. President Obama signed the much narrower bill last week.

The draft Domestic Manufacturing and Energy Jobs Act of 2010 unveiled by Levin would authorize an additional $3.5 billion of clean renewable energy bonds, 60% of which would be allocated to public power providers with the remaining 40% going to rural electric cooperatives.

It also would expand the use of CREBs to include energy storage systems and certain biogas equipment. CREBs can be issued as either tax-credit bonds or direct-pay bonds like BABs.

In the direct-pay mode, issuers would receive subsidy payments equal to 70% of interest costs.

The Joint Tax Committee estimated the CREBs provision would cost $1.391 billion over 10 years.

The Levin draft legislation also would authorize $2.4 billion of a new type of tax-credit bond — home energy conservation bonds — that the Treasury Department would allocate to state and local governments.

The bonds could be used to finance residential energy-efficiency assistance programs, provided at least 20% of the proceeds are used to make low-income energy efficiency assistance grants and loans, and at least 10% are used to make “very low-income residential energy efficiency assistance grants,” according to the legislative text.

Like CREBs, issuers would have the option of issuing the bonds as tax-credit or direct-pay bonds.

The provision is estimated to cost $1.252 billion over 10 years.

The legislation also would allow states and localities to issue private-activity bonds to finance homeowner energy-efficiency upgrades and retrofits as part of a property assessed clean-energy program.

The PACE programs have been adopted by 21 states and the District of Columbia. Under the programs, tax-exempt bond proceeds are used to finance the “green” upgrades and are eventually paid back by homeowners via a special assessment on their property taxes.

The provision is estimated to cost $730 million over 10 years by the Joint Tax Ccommittee.

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(FOX Business News) – In case you haven’t noticed, there are BABs in Bondland.

“Build America Bonds” were created by Congress under The American Recovery and Reinvestment Act passed last year.(1) They’re municipals with a twist: unlike traditional bonds issued by state and local governments, the interest on BABs is taxable instead of tax-free. As you might expect, this makes them pretty unattractive to typical muni investors, that is, folks in the top tax brackets looking to avoid losing more than a third of the interest earned to federal income tax.

None-the-less, non-traditional buyers, those who pay no or little federal income tax, are snapping them up.

Craig Brandon, manager of Eaton Vance’s Build America Bonds mutual fund, says BABs have created “a whole new market” of municipal-bond investors, including pension funds, foreign governments and corporations, as well as individual investors in the lower tax brackets.

To make it more affordable for cash-strapped cities and states to take on new debt, the federal government is picking up part of the interest- a total of 35-percentage points.(2) Thus, if the interest on a BAB is 5%, the cost to the issuer is 4.65% (5.00%-.35%). The investor, of course, receives the full 5%.

According to Mallas, approximately $121 billion of BABs have been issued since the first one came out in April 2009. By law, the money raised must be used to fund construction projects; fulfilling the goal of “stimulating” the economy by creating jobs.

So what’s not to love?

For one thing, just because the federal government is subsidizing the interest payments, don’t confuse a BAB with a Treasury bond.

“We’re hearing that retail investors think this is security guaranteed by the U.S. treasury or U.S. government,” says Mallas. “It’s not.” Neither the interest payments nor the return of principal are guaranteed, although he stresses that the municipal bond market has historically had a very low default rate.

Brandon maintains that, despite the fact that state and local governments are grappling with the worst budget shortfalls in history, it’s unlikely we’ll see a surge in defaults.

Take the extreme case: California. “If you’re the state of California, [defaulting] only gets you $5-6 billion… when you have a $20 billion hole,” Mallas says. “If you eliminate 100% of California’s debt, hat only solves 25% of its deficit problem. They have a spending problem, not a debt problem.”

Both managers assert that for investors who don’t need tax-exempt income, BABs offer a way to diversify bond holdings and potentially reduce your overall risk. Although T. Rowe Price doesn’t have a mutual fund specifically devoted to Build America Bonds, Mallas says they are held by some of the firm’s taxable bond funds.

In addition, BABs might pay you higher income than a corporate bond with a similar risk rating. Brandon points to an A1-rated state of Illinois BAB issued last week with a yield of 7.11% and a maturity date of 2035. By comparison, an Abbot Labs corporate bond due in 2039 and trading in the secondary market has the same rating but a yield of just 5.16%.

He adds, “I’m not saying ‘Sell all of your corporate bonds.’ [I’m suggesting you] diversify some risk [by moving into] the muni market and picking up a little more income.”

Next week: BABs are not without controversy. Unless Congress acts, the federal subsidy- and, thus, the issuance of new BABs- expires at the end of this year. Why you might be glad if that happened did.

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(The Bond Buyer) – House Ways and Means Committee chairman Sander Levin plans next week to unveil new jobs legislation that would extend Build America Bonds and other muni bond initiatives that are set to expire at the end of the year.

The Michigan Democrat talked to reporters about the jobs bill late last week. A source said the bill will include many of the same bond provisions in earlier jobs legislation the committee approved March 18. It was passed by the House a week later but never gained any traction in the Senate.

The new legislation will be a more streamlined version of the previous bill, with the hope that it will pick up more support and have a better chance of enactment, the source said.

Municipal market participants have been urging lawmakers to extend the BAB program and other bond provisions originally enacted as part of the American Recovery and Reinvestment Act before their year-end expiration dates.

In the earlier House bill, dubbed the Small Business and Infrastructure Jobs Act, the BAB program would have been extended until April 1, 2013, and the current subsidy rate — 35% of interest costs — would have been lowered annually to 33% in 2011, 31% in 2012, and 30% during the first three months of 2013.

That legislation also would have doubled in size the two recovery zone bond programs to $50 billion. It would have authorized an additional $10 billion and $15 billion of economic development bonds and facility bonds, respectively, with the proviso that each municipality receive an allocation equal to at least its share of national unemployment as of December 2009.

The recovery zone economic development and exempt facility bond programs originally were created as part of the ARRA, with issuers authorized to sell an initial $10 billion and $15 billion of the bonds, respectively, for economically distressed areas.

The bill also would have extended through 2011 a stimulus provision exempting all new private-activity bonds from the alternative minimum tax, including bonds refunding debt sold during and after 2003.

In addition, state and local governments would have been able to sell PABs for water and sewer facilities without being limited by state volume caps.

Further, tribal governments would have been permitted to issue private-­activity bonds for sewage and ­water supply facilities without being subject to PAB volume caps or the “essential government function” test that normally limits a tribe’s use of tax-exempt ­financing.

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(Bloomberg) – Texas, the second most-populous U.S. state, is set to benefit from its top ratings when it borrows $1.5 billion for roads tomorrow, the week’s largest municipal bond deal and the biggest Build America issue in a month.

The state, through the Texas Transportation Commission, is selling $1.38 billion as taxable Build America Bonds, debt that comes with a 35 percent interest-rate subsidy from the federal government, and $115.6 million of tax-exempt securities for bridge and highway projects.

Investors have been distinguishing between different quality Build Americas in recent months, said Chris Mier, municipal strategist and managing director with Loop Capital Markets LLC in Chicago. Spreads above Treasuries for top-rated municipal issuers have been narrowing compared with borrowers with lower credit scores.

“There’s been a little bit of a break for top-rated issuers,” Mier said. “For those without the well-known name, it will be a wider spread than it was two or three months ago.”

Top-rated University of Virginia sold $190 million of 30- year Build America Bonds July 21 priced to yield 4.9 percent, the lowest on record for that maturity, or a premium of 95 basis points to longest-dated Treasuries. A basis point is 0.01 percentage point.

The same day, the Sacramento, California, Municipal Utility District, with the fifth-highest investment grades from Standard & Poor’s and Moody’s Investors Service, sold $250 million 26- year bonds at a spread of 225 basis points above the benchmark. The spread on a previous sale by the agency, in May 2009, has widened 100 basis points in trading since April to 222 basis points by July 21, according data compiled by Bloomberg.

Average Yield

The average Build America Bond yielded 6.05 percent on July 23, according to a Wells Fargo & Co. index that began last August. Build Americas’ yield spread above 30-year U.S. Treasuries reached a record high of about 207 basis points this month, up from 142 basis points in early May, Bloomberg data show. The spread increased in part as Treasury rates fell amid signs the economy is slowing.

“The BABs market has become a little more discerning on credit quality,” said Tom Boylen, managing director at BMO Capital Markets in Chicago. “Everyone is more cognizant of credit.”

Issuers have sold about $122 billion of Build Americas since they were created as part of last year’s $862 billion economic-stimulus package. The program expires at year-end.

International Buyers

The taxable municipal bonds have offered international buyers higher yields than some corporate bonds, coupled with lower default risk. Investors in the U.S. and from other countries “are more comfortable with things they’ve heard of,” Mier said.

“You’ve got a lot of domestic issuers and international investors with no prior experience in munis,” he said.

Yields on top-rated, tax-exempt general obligations that mature in 10 years averaged 2.86 percent on July 23 for a third consecutive day, the lowest in at least nine-and-a-half years, according to Municipal Market Advisors data since January 2001. The securities have not had an increase in yields since June 15, data from Concord, Massachusetts-based MMA show.

This week’s total scheduled municipal issuance of $7.9 billion includes about $2.3 billion in Build America debt. Both figures are the highest since late June, when the Bay Area Toll Authority sold $1.5 billion in Build Americas, the last sale comparable to the Texas deal.

The city of Columbus, Ohio, has the third-largest scheduled sale of the week, a $430 million issue that includes the second- largest Build Americas issue, totaling about $280 million.

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(The Bond Buyer) – Even as Build America Bonds continue to transform municipal finance, one thing stays constant: hedging a portfolio of muni securities remains very difficult.

The BAB program has opened the market to new types of ­investors and traders, and potentially to greater liquidity and transparency.

That’s small solace so far to dealers, traders, and brokers of state and local government debt, who have found that hedging the credit risk in taxable municipal securities is just as elusive as it is in the tax-exempt space.

“For the most part, neither tax-exempts or Build America Bonds are that easy to hedge,” said a capital markets veteran. “It’s a long-only market, and it’s not super-liquid, with a limited ability to hedge spread risk.”

Whether in the taxable or tax-free municipal debt markets, the impracticability of hedging comes down to one thing: fully shielding an inventory of municipal bonds requires shorting municipal credit, and nobody has figured out a good way to do that yet.

In a sense, any decline in the value of a muni bond is attributable to one of two things: either the benchmark interest rate rises, or the spread of the bond’s yield over that benchmark interest rate widens.

Many market participants agree that hedging the former risk — which is known as duration — is not so tough.

Because U.S. Treasury debt provides the benchmark rate for just about all bonds denominated in dollars, and because Treasuries are among the most liquid and continuously traded instruments in the world, a trader stuck with a municipal position can hedge duration risk by shorting a Treasury.

Market participants say duration risk has also been hedged using Treasury futures or options, or short positions on the London Interbank Offered Rate.

That way, if prevailing interest rates spike and clobber the value of a dealer’s municipal bonds, he will recoup his losses with gains on his short position on Treasuries or Libor.

The risk of a widening in a bond’s spread over the Treasury rate is a different story altogether. A reliable method for positioning oneself to benefit from a municipal bond’s spread swelling out has yet to emerge.

Take the story of Fred Yosca, who trades both tax-exempt and taxable ­municipal bonds at Bank of New York Mellon. Yosca began trading BABs at the beginning of this year, and like many traders hedged his exposure by shorting Treasuries.

“My model was to hedge them fully based on duration, with the appropriate cash Treasury,” Yosca said. “That worked like a charm until May.”

From January through April, the nominal spread of the average BAB yield indicated by a Wells Fargo index tracking the sector over the 30-year Treasury rate compressed 40 basis points.

The long-BABs short-Treasuries model worked fine as BABs outperformed Treasuries during that period.

Then, in May, public sector workers in Greece rioted. The markets fretted over sovereign debt defaults and fat-fingered traders and double-dip recessions. ­People worried about the swelling supply of ­taxable municipal bonds in the primary market, or about federal subsidy withholdings — or whatever else you want to attribute the widening of BABs spreads to.

The BAB spread over the 30-year Treasury jumped 17 basis points in May.

Yosca was slammed with a short position on Treasuries, which strengthened 30 basis points in May, and a long position on BABs, which strengthened fewer than 15 basis points.

“I got killed,” he said.

Yosca’s lament: hedging duration risk does not address a shift in spreads.

The long-BAB short-Treasury hedge has since completely fallen apart, as the nominal spread has distended an additional 40 basis points since the end of May to about 200 basis points.

“There’s duration to hedge, and then there’s spread,” said one public finance banker. By shorting Treasuries, this ­ banker said, “you’d really only be hedging duration — you haven’t hedged that spread risk.”

This is not so foreboding a problem in the investment-grade corporate bond market, where traders have long had access to futures on a number of credit indexes that would decline should corporate spreads bleed out. That offers corporate traders a way to hedge duration using Treasuries, and hedge spread risk using indexes.

Municipal traders have no such index

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(The Bond Buyer) – The California municipal market was mostly flat with a slightly firmer tone Thursday, amid elevated secondary trading activity, as San Francisco Public Utilities Commission competitively sold $344.2 million of taxable Build America Bonds.

“The market still is very firm in spite of Treasuries going down,” a trader in Los Angeles said. “I think it has a lot to do with supply and demand. There is really very little supply in the marketplace. All the new issues seem to come to market priced through with the expectations of where its going to be. At higher prices they do tend to get cleaned up.”

The trader also noted that the secondary market “has been active today.”

“I have noticed that things were marked up from yesterday, and are actually trading today,” the trader said. “You get the picture that Treasuries really don’t govern the municipal market. I think what it’s really governed by right now is the supply and demand. And there’s not enough supply and there seems to be a little more demand than supply. It seems to be firm.”

In the California new-issue market the San Francisco Public Utilities Commission competitively sold $344.2 million of taxable BABs to Bank of America Merrill Lynch, with a true interest cost of 3.81%.

The BABs mature from 2022 through 2027, with a term bond in 2040. Yields range from 4.90% in 2022, or 3.19% after the 35% federal subsidy, to 6.00% in 2030, or 3.90% after the subsidy, all priced at par. The bonds were priced to yield between 195 and 275 basis points over the comparable Treasury yield.

The San Francisco PUC also competitively sold $102.7 million of tax-exempt bonds to JPMorgan, with a TIC of 2.53%.

The bonds mature from 2015 through 2021, with yields ranging from 1.51% with a 5% coupon in 2015 to 3.00% with a 3% coupon in 2021. Bonds maturing in 2016 were not formally re-offered. The bonds are callable at par in 2020.

The credit is rated Aa2 by Moody’s Investors Service and AA-minus by Standard & Poor’s.

The Treasury market showed losses Thursday. The benchmark 10-year note was quoted recently at 2.94% after opening at 2.87%. The 30-year bond was recently quoted at 3.95% after opening at 3.93%. The two-year note was recently quoted at 0.57% after opening at 0.56%.

The Municipal Market Data triple-A scale yielded 2.57% in 10 years and 3.67% in 20 years Thursday, matching levels of 2.57% and 3.67% Wednesday. The scale yielded 3.97% in 30 years Thursday, matching 3.97% Wednesday.

Thursday’s triple-A muni scale in 10 years was at 88.0% of comparable Treasuries and 30-year munis were at 100.8%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 107.3% of the comparable London Interbank Offered Rate.

The yield environment also contributed to the Rector and Visitors of the University of Virginia’s $190 million competitive offering Wednesday crossing the 5% threshold, yielding 4.90% before accounting for the 35% federal subsidy. It yielded 3.19% after accounting for it.

“You are talking about a specialty state area, and this exemplifies those characteristics given that the fact you do have a scarcity of paper in Virginia,” said Howard Mackey, president of the broker-dealer division of Rice Financial Products. “From a BAB situation you might have a local appeal, with a high quality name in this market place. Virginia paper was still quiet attractive.”

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(Bloomberg) – Top-rated University of Virginia sold $190 million of 30-year Build America Bonds yesterday to yield 4.9 percent, the lowest on record for that maturity, according to data compiled by Bloomberg.

The university, founded by Thomas Jefferson in 1819, became the first borrower to offer a 30-year Build America Bond with a 5 percent coupon since the federal government created the subsidized taxable municipal securities last year, Bloomberg data show. The previous low was 5.14 percent in a Washington state issue sold in May, Bloomberg data show.

“Something like Virginia is going to get prime attention,” said Alan Schankel, director of fixed-income research at Janney Montgomery Scott LLC in Philadelphia. “People have been waiting for real high-grade names.”

The average Build America Bond yielded 5.94 percent yesterday, according to an index that Wells Fargo & Co. began last August. The so-called spread above 30-year U.S. Treasuries reached 203 basis points as the borrowing costs for federal government debt fell amid signs the economy is slowing, Bloomberg data show. A basis point is 0.01 percentage point.

Since they were created as part of last year’s $862 billion economic-stimulus package, states, local governments and public agencies have sold about $121 billion of the securities. The U.S. Treasury pays issuers 35 percent of their interest costs if states and other public borrowers sell taxable instead of tax- exempt securities for new capital projects. Private nonprofits such as Harvard University don’t qualify. The program expires at year-end.

‘Quality Bond’

“I am very pleased with the outcome,” Yoke San Reynolds, the University of Virginia’s chief financial officer, said yesterday in a telephone interview after the school’s bonds were sold through competitive bidding. “We do not issue very often and we are a ‘triple-A.’ We are a quality bond.”

The university was the first to sell Build America Bonds, offering $250 million of the securities maturing in 30 years on April 15 last year at a yield of 6.22 percent, about 256 basis points more than comparable Treasuries, according to Bloomberg data. The yield for yesterday’s issue was about 95 basis points higher than the 30-year Treasury rate.

Proceeds will be used to finance capital projects at the campus in Charlottesville as well as at the university medical facility, including the Emily Couric Cancer Center, named after the late Virginia state senator and sister of “CBS Evening News” anchor Katie Couric, according to the bond prospectus.

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(Bloomberg) – The Port Authority of New York and New Jersey, which slashed its 10-year capital spending plan by 17 percent, is selling $400 million in revenue bonds amid a shortage of tax-exempt debt from the two states.

The pace of borrowing in New Jersey has dropped by almost 50 percent in the past year, as revenue declined and opened a projected $11.5 billion budget deficit for fiscal 2011 which began this month. The state sold $1.2 billion in tax-exempts last year after averaging $2 billion annually from 2007 to 2009, Bloomberg data and state debt reports show.

The dearth of highly rated tax-free bonds from New Jersey will help attract investors to the authority’s debt, according to Mike Pietronico, chief executive officer of New York-based Miller Tabak Asset Management.

“There’s been so little high-quality supply in the state of New Jersey, that even though this is a dual-exempt bond, New York and New Jersey, I think New Jersey, in and of itself, could absorb it,” said Pietronico, who oversees $275 million in municipal securities. “I expect it to be bid very aggressively by the street.”

New York state investors may be drawn to the sale because it hasn’t issued much debt as it struggles to pass a budget, according to Howard Cure, managing director at Manhattan-based Evercore Wealth Management LLC, which oversees about $1.5 billion.

“They have a lot of debt issuances on hold, particularly the personal-income tax bonds, until they essentially pass a budget,” Cure said. “The fact that there hasn’t been a lot of New York state paper makes this pretty attractive.”

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