Sell Side

Bond Volume Surges 82.5% Over March 2011 Figures

New issuance of long-term municipal bonds continued to rebound in March from last year’s relatively anemic figures, surging 82.5%.

Monthly Tables

Year-to-date volume at the end of March was up 63.5%.

Issuers in March brought 1,196 deals to market worth $34.50 billion, against just 849 deals one year earlier that totaled $18.91 billion, according to Thomson Reuters.

Year-to-date volume stood at $78.3 billion in 2,927 deals compared to $47.9 billion in 1,937 issues for the same period in 2011, when volume contracted sharply due to the expiration of the Build America Bond program and other factors.

Historically low yields have encouraged refundings this year and many municipalities took the bait.

Refundings boomed in March, growing by 122.7% to $15.52 billion in 703 deals. That compares with just 286 deals that totaled $6.97 billion in March 2011. Still the pace of refundings fell from February’s increase of nearly 170%.

There was a sizable move up in yields mid-March, which put the breaks on refundings.

Refunding offerings have played a large role in the primary market in 2012, representing 57% of issuance, compared with 33% through the same period in 2011.

“Year-to-date, refundings continue to represent the lion’s share of supply,” said Phil Villaluz, head of municipal research and strategy at Sterne Agee.

Meanwhile, new-money deals last month rose 19%. They totaled $10.47 billion on 398 issues, against $8.81 billion on 478 issues in March 2011.

Alongside the increased new issuance, muni bond fund inflows have been strong and yields have mostly been range-bound at historically low levels.

In March 2011, the muni market was stabilizing after a turbulent period, said Peter Hayes, head of municipal bond trading at BlackRock.

The market had emerged from a large selloff in December 2010 and January 2011, sparked in part by predictions that the market would see a wave of muni defaults.

“We saw crossover buyers back in the market,” Hayes said. “Fund flows were still negative. So the market was just beginning to find its footing and stabilize a bit. Issuance was still very low; it hadn’t started to come back yet.”

The market’s largest sectors saw sizable gains in issuance last month over the same period in 2011. For starters, general purpose deals surged 123.6%, to 363 issues totaling $12.08 billion. This compares to 194 deals for $5.40 billion one year earlier.

Education followed with a 59.5% gain in volume for March on $8.07 billion on 478 deals.

In March 2011, the market saw $5.06 billion on 352 issues.

Transportation and public facilities saw the largest jumps among sectors, March 2012 over March 2011. Transportation deals soared 207.5%, while public facilities leapt 164.4%.

General obligation bonds outpaced revenue issuance for the month, as well. GO volume climbed 126.8% in March 2012, with $18.98 billion on 847 issues, against $8.37 billion on 525 deals one year earlier.

The supply of revenue bonds rose to 47.2% in March, at $15.52 billion on 349 deals, versus 324 deals worth $10.54 billion.

State governments issued 159.2% more debt in March than they did one year earlier, to the tune of $7.52 billion on 26 issues against almost $2.90 billion on 18 issues.

New supply from state agencies increased 70.6% in March from one year earlier, to $6.86 billion on 85 deals versus $4.02 billion on 69 issues.

Also, issuance from cities and towns jumped 92.5% in March 2012, compared with one year earlier. That broke down to $6.45 billion from 378 deals in March 2012, against $3.35 billion on 245 deals in March 2011.

Bonds hailing from New York and California occupy several of the top-12 issues in a month that included two deals above $1 billion. But Puerto Rico managed the largest issue for the month: $2.32 billion of commonwealth GOs.

A California GO issue that totaled $1.90 billion placed second. They were followed by $933 million in bonds from the California State Public Works Board for correctional facilities.

The New York State Thruway Authority issued $780.5 million in GOs. And Maryland rounded out the top-five with $738.4 million in GOs.

Refunding deals far outpaced new-money during the first quarter. For the first three months of 2012, refunding deals were up 159.2%, with 1,674 issues for $36.85 billion.

Over the same period in 2011, they weighed in at 633 deals totaling $14.21 billion.

By comparison, new-money issues totaled $26.46 billion, on 1,030 issues during the first quarter of 2012.

That figure represented almost a 3% drop from the same period one year earlier, when there were $27.22 billion on 1,118 issues.

In addition, the market’s two largest sectors saw impressive gains in volume during the first quarter 2012.

Education issuance was higher during the period by 73.2%, to $24.50 billion from $14.15 billion. General purpose deals were up 45.2% for the first three months of 2012 against the same period in 2011, to $23.23 billion from just under $16 billion.

Issuers in California leapfrogged into the top spot among issuers by state for 2012.

The Golden State, ranked number 3 at this point in 2011, has so far issued almost $9.70 billion on 152 issues. That compared with $4.34 billion over the same period in 2011, a 123.4% increase.

New York issuers relinquished the top position during the first quarter of 2012. The Empire State issued $8.41 billion on 203 deals so far this year, against $6.67 billion on 121 issues.

Texas-based issuers inched up one spot to third through the first three months of the year. The Lone Star state totaled $7.65 billion on 296 issues over the period. That compares with $3.17 billion on 173 deals issued during the first quarter of 2011.

Issuers in Puerto Rico took fourth place through the first three months of 2012, with issuance rocketing 559% over the same period in 2011.

Finally, issuers in Washington occupied the fifth position through the first quarter of 2012. The Evergreen State saw volume climb 79.7% over the same period in 2011.


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