Municipalities eased off the throttle last month, marking the first break this year from increases in new issuance.
Long-term muni bond volume for September fell 9% from the same period in 2011. There was $24.9 billion in 775 issues for the month, against $27.5 billion in 918 deals one year earlier, Thomson Reuters numbers showed.
For the year to date, however, volume is up 44% over the same span in 2011. That boils down to just under $278 billion in 9,628 issues, versus $193.2 billion in 7,517 deals over the period one year earlier.
Thanks to the persistence of historically low rates, refundings continue to dominate new issuance in 2012. But last month, the number of refinancings actually fell 37%, to $6.87 billion in 315 deals, down from $10.95 billion in 431 issues a year ago.
Still, refundings through three quarters in 2012 are up 91%. There have been $117.7 billion in re-fis for the year to date in 4,602 deals. That compares with $61.54 billion in 2,589 issues over the same period in 2011.
New-money issues for September were up 13%, to $10.54 billion in 381 issues, compared to $9.34 billion in 424 deals a year ago.
For the year to date, new-money issues are up 9%. The market saw $105.3 billion in 4,162 deals, versus just under $97 billion in 4,282 issues over the same span in 2011.
September opened with high expectations around issuance, BlackRock muni strategist Sean Carney said, but overall volume underwhelmed market participants. And given the recent trend of rising issuance, the month-over-month decline and 22% decline from average September issuance numbers was largely unexpected in the marketplace, he added.
“We have to remember that early September was a little unstable as the holiday hindered issuance, rates were rising, trade volumes were below average,” Carney said. “It’s too early to give up on what history tells us is going to be a supply-heavy period. It wouldn’t be startling to see a rebound in next month’s figures. But supply did not physically materialize like the market had anticipated.”
Among the largest issuing sectors of the market, volume was mixed. General purpose, education and utilities saw declines from September 2011 numbers, at 30%, 12% and 31%, respectively. Transportation and health care, though, saw jumps over the same period, at 39% and 49%, respectively.
State agencies recorded a 62% rise in issuance in September from one year earlier. But districts, local authorities, and cities and towns reported drops in volume, at 36%, 16% and 8%, respectively.
Tax-exempt volume fell 18% year over year, to $19.8 billion in 688 deals from $24.1 billion in 830 issues. By comparison, taxable issues saw a 69% increase over the same period, jumping to $3.91 billion in 73 deals from $2.32 billion in 76 issues.
Revenue bond issuance climbed just 6% in September to $16.4 billion in 274 deals from $15.5 billion in 337 issues. The amount of general obligation deals fell 29% from the same month in 2011 to $8.55 billion in 501 issues from almost $12 billion in 581 deals.
Negotiated volume dropped 3% last month, to $20.2 billion in 480 issues from $20.9 billion in 579 deals. By comparison, competitive offerings slipped 28% in September 2012 from a year ago. There were $4.42 billion in 288 issues last month, versus $6.16 billion in 302 deals in September 2011.
Furthermore, competitive offerings represented just 18% of total volume in September. That is fairly low, according to John Hallacy, municipal research strategist at Bank of America Merrill Lynch. Historically, competitive offerings usually comprise a range of 25% to 33% of issuance, he said.
“Clearly, more issuers are selecting going negotiated,” Hallacy said. “It speaks to how they really have to be flexible and sensitive to structure and where the demand is on the curve. And there needs to be more negotiating about how to get the best price.”
Meanwhile, the two largest state municipal issuers through the first three quarters of 2012 switched positions. Issuers in New York took the top spot through September, floating $37.4 billion in 687 deals, versus $23.2 billion in 443 issues over the same period in 2011, a 61% increase.
They leapfrogged issuers in California. Still, those in the Golden State saw a 32% jump in volume, at $32.9 billion in 543 issues. That compares with almost $25 billion in 574 deals over the first nine months of 2011.
Texas followed, as it did through three quarters of 2011, with a 53% increase. The Lone Star State floated $26.4 billion in 964 deals, versus $17.2 billion in 744 issues through September of 2011.
Illinois and Florida round out the top five. They saw increases of 55% and 38%, respectively, over the first three quarters of the year compared with the same period in 2011.
Michigan and Virginia saw large jumps in issuance up the rankings. Michigan vaulted to eighth place from 17th place through the first three quarters of 2012 versus one year earlier on 160% more volume. Virginia leapt to 11th place from 18th for the period, issuing 139% more in volume.
Three deals topped $1 billion last month. They were led by the Port Authority of New York and New Jersey, which on Sept. 27 issued $2 billion of taxable consolidated bonds that arrived as both new money and refundings.
California placed second. It issued $1.78 billion of GO bonds on Sept. 25.
New York’s Metropolitan Transportation Authority floated the third largest loan. It issued $1.27 billion of transit refunding bonds on Sept. 20.