Trend in the Region

Far West’s Volume Down in First Half

ALAMEDA, Calif. — Issuers in the Far West sold $43.36 billion of municipal bonds in 672 transactions during the first six months of 2010, according to Thomson Reuters, down from $47.12 billion in 600 transactions in the first half of 2009.

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The Build America Bond program developed more traction as the Far West’s taxable municipal bond volume more than doubled, to $17.9 billion in 183 issues from a little under $9 billion in 44 deals in the first half of 2009.

At the same time, tax-exempt issuance was down more than 34%, to just more than $25 billion for the half.

Tight supply helped drive down overall tax-exempt yields, according to Richard Ciccarone, a managing director and the chief research officer at McDonnell Investment Management LLC.

“The demand has remained steady; mutual funds themselves have seen inflows,” he said. “You have sufficient evidence there to suggest that [demand] will consume the bond issues that are available.”

Low yields did not drive a stampede to issue. This could be because politicians may not be willing to sell debt to voters who are awash in news of unemployment and budget deficits.

“There’s sensitivity to taxpayers, if they’re governmental bodies,” Ciccarone said. “There is a lot of concern that adding taxes at this time is going to go against the prevailing winds of the Tea Party revolt and add fuel to that fire.”

California was the region’s top issuer, credited with six issues for $6.02 billion in volume.

The state government’s issuance was down by more than half from 2009’s first six months, in a return to a more normal pace of bonding.

In the first half of 2009, California was making up for nine months of lost market access as the result of a budget and liquidity crunch in 2008.

Low overall yields have helped California’s government less than some other ­issuers, Ciccarone said, because of the headlines that dog the state over its persistent budget problems and single-A ­ratings.

“There’s not much of a quality distinction in the double-A rating and above,” he said. “When you get to the A and lower level, you see more of a quality spread as investors are sensitive to headline news.”

The California Department of Water Resources was the second biggest issuer by volume, on the back of a single, $3 billion deal to refund outstanding electric power revenue bonds.

Variable-rate debt volume was down substantially, to less than $1.3 billion for the half.

Bond insurance remained a niche ­product, accounting for less than $2 billion in the region, down more than 14% compared to the year earlier.

Citi kept its place atop the regional ­underwriting table, credited with $10.66 billion in volume, ahead of JPMorgan, which tallied $6.02 billion.

Public Resources Advisory Group was the region’s top financial adviser by volume, credited with more than $7.8 billion over 14 issues, ahead of Public Financial Management, which advised on 87 deals for nearly $7.2 billion.

Orrick, Herrington & Sutcliffe topped the bond counsel chart again, with a 35.4% market share by volume.

California volume was down more than 14% to under $30.3 billion. The same firms that topped the regional chart topped the California league tables — Orrick, Citi, and PRAG.

In Washington, volume increased more than 35% to top $5.7 billion.

Citi led the state’s senior manager ­rankings.

Montague DeRose & Associates LLC edged Seattle-Northwest Securities Corp. to top Washington’s financial adviser chart.

Foster Pepper PLLC was the top-ranked bond counsel.

Bond issuance in Nevada was up more than 56% compared to the first half of 2009, to almost $2.6 billion.

“I think local governments were ­cognizant of the fact that if they could ­issue some bonds and get some of these construction workers employed, it was a good time to do that,” said Katherine Ong, partner at financial adviser Hobbs, Ong & Associates.

The joint venture between Hobbs Ong and Public Financial Management led the state’s financial adviser charts.

More than two-thirds of Nevada’s volume is attributed to Clark County, which was the largest issuer in the region outside of California, selling almost $1.9 billion.

A significant portion of that issuance was for McCarran International Airport in Las Vegas, which is constructing a new terminal.

Citi was Nevada’s top underwriter by volume. Sherman & Howard dominated the bond counsel rankings with more than 96% market share.

Volume dropped more than 32% in ­Oregon, to less than $2.2 billion.

Volume had surged there in early 2009 after voters approved many local bond measures in November 2008.

The top issuers were the Oregon ­Department of Transportation with $580.3 million and the Oregon Department of Administrative Services with $345.1 million.

Bank of America Merrill Lynch was top underwriter in Oregon. K&L Gates led among bond counsel. PRAG led among financial advisers.

Volume in Hawaii rose more than 12%, to $1.588 billion. The state ­government was responsible for more than $1.33 ­billion.

Montana issuance more than tripled, to $300.2 million, while Alaska volume dropped almost in half, to $286 million.

Idaho volume fell 45% to $271 million.

Issuers in Wyoming sold the least in the period, with only seven deals for $101.4 million.



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