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Muni Bond Issuance Jumps 34% in August

Long-term municipal bond volume last month easily outstripped that of the same period in a relatively issuance-starved August 2011.

Issuance rose 34% over the period, at $31.8 billion in long-term munis in 999 issues in August 2012. That compared with a paltry $23.8 billion in 983 deals in the same period one year earlier, Thomson Reuters numbers showed.

For the year to date, there has been 53% more in long-term issuance than there was over the first eight months of 2011, at $252.8 billion in 8,801 deals. That compared with $165.7 billion in 6,599 issues through August 2011.

The August numbers made for a fairly typical month, according to John Hallacy, municipal research strategist for Bank of America Merrill Lynch. Its volume numbers fell in the range of roughly $26-$34 billion for the month over a 12-year span.

“I think we were feeling August was lighter,” he said. “That’s because the activity slowed a little bit the last week and a half or so.”

The month’s numbers were boosted by the fact that August was a strong month for rollover, he added. About $33 billion of principal redemptions and interest came due during the month and needed to be reinvested.

Extremely low interest rates and refinancings, though, remain the story for month and the year. Refundings in August were up 42%, at $14.1 billion in 398 issues, against $9.9 billion on 414 deals during the same period in 2011. New-money deals were 15% higher last month than they were in August 2011, at $12.9 billion in 514 deals.

For the first eight months of 2012, there has been 119% more in refis than over the same period in 2011. That works out to $110.6 billion in refundings for the year to date in 4,232 deals, against $50.6 billion in 2,158 issues through the first eight months of 2011.

By comparison, new-money issues for the first eight months of 2012 are up just 9% over the same period in 2011. They’ve totaled $95.4 billion in 3,804 issues through August, against $87.7 billion through the same period in 2011.

But the appetite for munis by retail, institutional investors and crossover buyers has held firm throughout the year, said Daniel J. Genter, chief executive at RNC Genter Capital Management.

“There’s just a tremendous appetite that’s driving this volume,” he said. “And obviously the issuers are seeing it; they’re capturing low rates, and they’re going to keep pushing it. We see the numbers in September continuing to be strong as we go forward.”

Among the largest issuing sectors, August saw volumes jump 27% in education, 196% in transportation, and 44% in the general purpose category. Utilities, typically one of the heaviest issuers, experienced a 26% decline in issuance.

Health care, typically a sector that carries an elevated risk of default, saw volume in August jump a dramatic 177%. Issues vaulted to just under $3 billion in 39 deals from almost $1.1 billion in 26 deals in August 2011.

Tax-exempt issuance rose 30% in August, at $26.1 billion in 888 deals. That compared with $3.6 billion of taxable issuance in 94 deals, a 50% increase from August 2011. Negotiated volume climbed 38% last month, to $24.9 billion in 651 issues. By comparison, competitive deals rose 42%, to $6.8 billion in 338 issues.

Revenue bond issuance saw a 31% increase in August from one year earlier, at $21.4 billion in 375 deals. That compared with $10.4 billion in general obligation debt that issuers floated in August, a 38% increase from the same period in 2011.

Among state and local municipalities, the largest issuers generally saw gains. State agencies represented the lone exception; they saw issuance in August fall 0.2%, at $8.3 billion in 80 deals, from the same period a year earlier.

Cities and towns saw a 63% increase in issuance last month, at $5.8 billion in 313 deals. Districts experienced a 61% jump in volume over the same period from a year earlier, at $5.6 billion in 373 issues. And issuance for local authorities rose 28% in August compared with a year ago, at $5.9 billion in 118 deals.

New York held the top spot among state issuers year to date, switching positions with California, the leader over the same period in 2011. Volume for New York through the first eight months of 2012 has risen 72%, to 33.1 billion in 635 deals.

The Golden State dropped to second place over the same period. Issuers there floated $28.5 billion in 497 deals, a 43% increase year to date. Texas played third fiddle through the year’s first eight months, as it had in 2011. The Lone Star State issued $24.7 billion in 903 deals in 2012 through August, a 61% increase.

Illinois ranked fourth through the first eight months of the year. It issued $12.6 billion in 414 deals, up 54%.

Washington rounds out the top-five largest state issuers, in the process exchanging its position with Pennsylvania, which placed seventh through the first eight months of 2012. Washingtno saw its issuance jump 82%, at $10.6 billion on 177 deals.

The month’s two largest deals, as well as the only ones that weighed in at more than $1 billion, hail from issuers in New York.

The New York City Transitional Finance Authority on Aug. 9 floated $1.4 billion of general purpose bonds, both new money and refundings, as well as taxable and tax-exempt. The Triborough Bridge and Tunnel Authority on Aug. 3 issued $1.24 billion of refunding bonds.

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