Municipal bond issuers in the Northeast sold $116.4 billion of debt in 2016, according to Thomson Reuters data, a 13% increase that echoed a national trend.
A late push the last six months drove the surge. Year-over-year volume jumped 27.5% in the third quarter and 18.9% in the fourth quarter.
Bond sales across the nation rose 11% last year compared to 2015.
The Northeast saw the 2nd biggest increase of the nation's five regions behind only the Midwest, where volume was up 23.4%. The region encompasses 11 states from Maine to Maryland, along with the District of Columbia, Puerto Rico and the U.S. Virgin Islands.
In 2015, Northeast issuance was up 9% from 2014.
"As with 2015, refinancing was a large driver of new municipal issuance in 2016, but I believe record lows in interest rates played a key role in stimulating volume," said Janney Capital Markets municipal analyst Alan Schankel. "Issuers sought to lock in low borrowing costs ahead of potential Fed hikes which was an important factor on both the refunding and new money fronts. "
The rank of the top six Northeast states for bond issuance remained unchanged from 2015, led by New York with $44.1 billion.
It was followed by Pennsylvania with $20.3 billion, Massachusetts with $15.5 billion, New Jersey with $12.8 billion, Connecticut with $7.9 billion and Maryland with $7.5 billion.
Massachusetts had the largest 2016 spike of the region's 11 states, up 45% led by a $1.5 billion Massachusetts Development Finance Agency sale on Oct. 6 for Harvard University. The State of Massachusetts also came to the market with a $1.1 billion general obligation sale on March 3.
The Bay State had $6 billion of refundings, a 61% rise from 2015, and deals categorized as combined new money and refunding were up 43% to $2.9 billion.
"The trend toward refundings played out in the northeast and particularly in Massachusetts," said Ajay Thomas, head of public finance at Chicago-based William Blair & Co. "Many private colleges in the state came to market to refinance debt."
New Jersey issuers posted the second biggest issuance increase in the region, up 32.7% from 2015. The New Jersey Transportation Trust Fund's $2.7 billion of federal highway reimbursement revenue notes sold on Oct. 26 was the largest Northeast transaction 0f 2016.
"New Jersey volume generally goes up or down by state decisions," said Jim Tricolli, a managing director in the RBC Capital Markets municipal division, noting that the Garden's State's bond issuance is controlled by the treasurer's office and not from different agencies "When the state does big transportation or education deals like last year, we generally see volume is up."
A large portion of New Jersey's debt issued last year was in the form of refundings at $4.2 billion, a 39% increase from 2015. The state also sold $2.6 billion that combined new money and refunding through 23 issues.
"Interest rates dropped very low and states that needed to fill funding gaps that had debt they could refinance which is a big reason why New Jersey came to market so much," said Dan Heckman, a senior fixed income strategist at U.S. Bank Wealth Management.
Connecticut also had an active 2016 with a 10% volume increase the state government's worsening credit quality due largely to underfunded pensions. The state had a slight drop in new money issuances, but was up 5.5% in refundings and 119% in combined deals.
"There was a lot of outstanding debt in Connecticut from 2006 and 2007 that was able to be refinanced," said Thomas. "We saw strong demand for the state from investors despite the headlines with the state in terms of state pensions and its financial challenges."
Pennsylvania's municipal bond volume rose 11.3% in 2016 compared to the previous year despite having 52 fewer issues. The Commonwealth's $1.2 billion GO deal on Aug. 9 was the region's fifth largest sale. The state government was ninth-ranked among Northeast issuers for the year with $2.8 billion.
New York saw a 3.4% bump in bond volume compared to 2015.
The region's two largest issuers both hailed from the Empire State, led by the Dormitory Authority of the State of New York with $5.9 billion followed by the closely Metropolitan Transportation Authority with $5.2 billion. DASNY was the second biggest issuer in the nation, behind only the state of California, which sold $8.9 billion in debt.
The New York Transportation Development Corp. had 2016's second largest bond deal for the Northeast with a $2.4 billion sale of special facilities bonds on May 17 to spearhead a $4 billion overhaul of LaGuardia Airport. The Empire State Development Corp.'s $1.65 billion sale of general-purpose personal income tax revenue bonds on March 9 was the region's third-biggest.
"Governor [Andrew] Cuomo has made capital projects a high priority," said Paul Mansour, head of municipal research at Hartford, Conn. -based Conning. "It's big and small projects that is driving volume in New York State."
Bank of America Merrill Lynch kept its hold in 2016 as the region's biggest senior manager by par value with Thomson Reuters crediting it with $22.7 billion of volume. Citi, JPMorgan and Morgan Stanley retained second, third and fourth place rankings, respectively. Wells Fargo replaced RBC Capital Markets in the fifth spot.
Hawkins Delafield & Wood remained the region's top bond counsel firm in 2016 with $11.3 billion from 220 issues, according to the Thomas Reuters data. Mintz Levin Cohn replaced Orrick Herrington & Sutcliffe in the second place position moving up five spots from its 2015 seventh place ranking. Orrick ranked third, followed by Norton Rose and Locke Lord LLP.
Public Financial Management retained its top spot in the financial advisor category, credited with $29.6 billion, with Public Resources Advisory Group retaining the second position in the volume rankings. Acacia Financial finished third, Hilltop Securities placed fourth and AC Advisory ranked fifth.
