Bond insurance reaches new heights

Assured Guaranty accounted for a total of $5.513 billion in 252 deals in the first quarter of 2021, almost tripled from its Q1 2020 total of $2.232 billion in 146 transactions.

“We continued to see strong demand for our bond insurance, similar to what we saw in 2020, when certain quarters last year reached decade-long highs for both demand for our guaranty and insurance industry penetration of the municipal bond market," according to from Robert Tucker, senior managing director and head of investor relations and communications at Assured.

"Our first quarter 2021 primary market insured par was almost two-and-a-half times our insured par in last year's first quarter," Tucker said.

Tucker noted that AGM's first-quarter primary market insured par was almost 2.5 times higher than last year’s first quarter, and its transaction count was up 57%.

"This comparison partly reflects the market disruption caused by pandemic concerns in the first quarter of 2020, but in what may be a more meaningful comparison, our first-quarter production is also 19% higher than in the fourth quarter of 2020," Tucker said.

Tucker added that the bond insurance industry also performed well in comparison with the total market.

"Insurance was up almost 70% while the market was up less than 19% for the first quarter year-over-year," he said.

Assured continued to benefit from institutional investors’ preference for Assured Guaranty’s insurance on larger transactions, as in the first quarter, Assured wrapped eight deals $100 million or larger.

Among those transactions were $658 million for Tucson, Arizona COPs pension obligation bonds and $551 million for Mets Queens Ballpark.

Tucker also said Assured continued to add value to double-A credits in the first quarter, insuring $1.5 billion of par on 27 deals rated in the double A category by Moody’s Investors Service and S&P Global Ratings, including seven in the competitive bid market totaling $276 million of insured par.

Build America Mutual accounted for a total of $2.984 billion in 262 deals in the first quarter of 2021, up from its Q1 2020 total of $2.512 billion in 201 transactions.

BAM's principal amount for the quarter came in at $2.984 billion, compared to $2.512 billion last year.

“This was BAM’s strongest first quarter on record, and it showed that the increased investor demand for insured bonds that started following the spread of the pandemic last Spring is continuing," said Seán McCarthy, CEO of Build America Mutual.

He noted that in particular, BAM saw institutional investors seeking to preserve value and maximize liquidity.

"Underwriters [are also] utilizing insurance to broaden the base of investors interested in our member issuers’ transactions, including sales with double-A category underlying ratings," he said.

BAM's largest transaction of the quarter was a representation of overall trends seen in the market. BAM insured an $109 million of a $286 million deal for the city of Orange, Calif. It was a taxable deal.

BAM noted the issuer had a double-A underlying rating from S&P, so the buyers were "valuing the insurance for more than the rating," and the fact it was partially insured showed "how underwriters structured it to attract a mix of buyers."

McCarthy added that more issuers are being recognized for transactions that finance projects that align with the Green Bond Principles.

"BAM GreenStar verified 30 transactions worth $321 million during the quarter, more than tripling the volume from the first quarter a year ago," he said.