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Muni Bond Issuance Up Slightly in October

NOV 5, 2012 1:18pm ET
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Municipal bond volume saw a slight bump for the month of October, continuing what has been an upward path for the issuance of new muni debt in 2012.

Long-term muni bond issuance last month rose 3%, to $33.8 billion in 1,051 issues. That compares with $32.9 billion in 923 issues for October 2011.

For the year to date, muni bond volume has increased 39%, to $313.6 billion in 10,761 issues from $226.1 billion in 8,439 deals over the same period one year earlier, Thomson Reuters numbers show.

Refundings continue to play a prominent role, said Priscilla Hancock, a managing director and municipal strategist at JPMorgan Asset Management. Refinancings have seen a 24% climb in October and an 86% jump for the first 10 months of the year.

"Volume is up this year, almost entirely due to refunding," she said, "which makes sense given historically low rates."

In October there were $12.3 billion in refundings in 484 issues, compared with $9.9 billion in 417 deals one year earlier. New money deals last month comprised $13.6 billion in 461 issues. That represented a 17% decline from October 2011, when $16.2 billion were floated in 445 deals.

For the year to date, refundings comprised $132.8 billion in 5,144 deals, against $71.5 billion in 3,005 issues through the same period in 2011. By comparison, new money issuance for the first 10 months of 2012 has risen a mere 3%. They've totaled $116.9 billion in 4,630 deals so far this year, against $113.2 billion in 4,727 issues through October 2011.

Long-term bond issuance is up for the month and year to date, but it's just 4% under its running 10-year average of $35.2 billion, said Sean Carney, municipal strategist at BlackRock. Throughout 2012, it has been investors, and not issuers, who have been moving the market.

"This year has been marked by the fact that the demand component has outweighed the supply component that typically drives the market's technicals," Carney said.

General purpose and education bonds once again saw the heaviest issuance among sectors last month, as they did in October 2011. But their increase in issuance year-over-year, at 3% and 8%, respectively, was relatively slight. In 2012 through October, general purpose issuance is up 42%, while education is 25% higher.

Issuance in some sectors could well be affected the coming U.S. elections. For example, education and health care, sectors that continue to issue solid amounts of debt, have the potential to be affected down the line by pending tax initiatives that will be voted on imminently, Carney said.

Sectors that saw the largest monthly increases, year-over-year, include electric power and public facilities. Electric power weighed in at $1.84 billion in 20 issues in October, versus $653 million in 13 deals one year earlier, or a 181% rise.

Public facilities issuance rose 315% last month over October 2011. That worked out to $1.20 billion in 61 issues, against $290 million in 45 deals.

Negotiated deals for the month have climbed 5%, to $27.5 billion in 679 issues, against $26.2 billion in 581 deals one year earlier. The amount of competitive issues in October has fallen 1%, to $6.26 billion in 361 deals, versus $6.34 billion in 317 issues in October 2011.

Revenue bonds were up 17% in October from one year earlier, to $23.0 billion in 391 issues. That compares with $19.7 billion in 322 deals in October 2011.

General obligation bonds saw an 18% decline last month from one year earlier, to $10.8 billion in 660 deals. In October 2011, GO issuance measured $13.2 billion in 601 deals.

Large state and local government sector issuers continued to see increases in debt issuance last month. State agencies led the way with a 14% rise in new deals, at just under $12 billion. Cities & towns and districts saw hefty increases in bonds floated during the month of October. Issuance for cities & towns leapt 130% over the period, to $6.2 billion from $2.7 billion. Districts floated 32% more debt in October, to $4.7 billion from $3.5 billion one year earlier.

Among the states, issuers from New York took the lead for October. They switched positions with those in California.

Issuers in New York floated a total of $42.9 billion in long-term debt in 754 issues so far in 2012, compared with $27.4 billion in 485 issues, or a 56% rise. California issuers accounted for $36.7 billion in 606 deals in 2012, against $30.2 billion in 631 issues, a 22% increase.

Texas issuers ranked third once again. The Lone Star State saw a 57% jump in issuance, to $30 billion in 1,083 deals so far in 2012. That compared with $19.1 billion in 836 issues through the first 10 months of 2011.

Issuers in Illinois ranked fourth, as they did through the first 10 months of 2011, on $14.2 billion in 541 deals. That gave the Land of Lincoln a 26% jump from numbers through October 2011, or $11.3 billion in 406 issues.

Pennsylvania rounded out the top five, just as it did through the same period in 2011, with $13.8 billion in issuance in 534 deals, or a 33% rise. One year earlier, issuers in the Keystone State floated $10.4 billion in 397 issues.

Just two deals crossed the $1 billion mark in October. The month's largest deal, $2.83 billion of Pennsylvania Economic Development Finance Authority general purpose bonds, arrived on Oct. 3. They were followed a day later by $1.13 billion of New York City GOs, comprised of both new money and refunding debt.

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