Bond insurers still soaring

The two active municipal bond insurers wrapped $25.22 billion in the first three quarters of 2020, a 62% surge from the $15.57 billion of deals done in the first nine months of 2019.

The industry par amount was achieved in 1,595 deals, up from the 1,227 the same time in the year before. The insurance saturation rate climbed to 7.67% year-to-date, compared to 5.81% this time in 2019.

The wrap rate was 6.93% at the halfway point of this year and 5.94% after the first quarter, compared to 5.67% halfway through 2019 and 4.78% after the first three months of 2019. At this rate, the year will end with the highest it’s been since 2009 when it was 8.64%.

Assured surpasses its 2019 total after three quarters
Assured Guaranty insured $14.92 billion in 731 deals for a 59.2% market share, versus $8.81 billion in 615 transactions or 56.6% market share in the same time period the year before. The figures are according to Refinitiv and include Assured's subsidiary Municipal Assurance Corp.

“Assured Guaranty continued to lead the municipal bond insurance industry in the third quarter when the market saw the highest quarterly insured par since mid-2009, which was 82% higher than in last year’s third quarter,” said Robert Tucker, senior managing director and head of investor relations at Assured. “Driven by this heightened demand for insurance combined with a 35% year-over-year increase in quarterly issuance, Assured Guaranty’s third-quarter production totaled $7.5 billion of primary-market par, essentially double the amount we insured during the third quarter of 2019.”

These third-quarter new-issue figures include two transactions with corporate CUSIPs in 2020 and one in 2019. With the addition of secondary-market business, Assured’s third-quarter 2020 par insured totaled $7.7 billion.

“The third quarter saw Assured Guaranty’s largest U.S. public finance transaction year-to-date, $726 million of insured par written for the Yankee Stadium project,” Tucker noted. “This was one of 19 new issues that each utilized $100 million or more of our insurance. As a result of increased institutional demand for our insurance, year-to-date, Assured Guaranty has written more than $100 million of insured par on 33 individual transactions, more than in any full year over the past decade.”

In the case of AA credits (defined as those credits that have a “AA” category rating from S&P or Moody’s on an uninsured basis), Assured Guaranty insured a total of $806 million of par, reflecting the market’s recognition of the value of the company’s guaranty in the current economic environment, according to Tucker.

“During the first nine months, we guaranteed a higher par volume of such double-A credits than in all of 2019 and year-to-date, Assured Guaranty’s total new-issue insured par sold has already surpassed its full-year 2019 total by $1 billion.”
BAM more than doubles its AA business
Year-to-date, Build America Mutual has accounted for $10.29 billion of insured volume spanning 865 transactions, or 40.8% market share, compared with $6.76 billion in 613 deals and 43.4% market share in the same time last year.

“BAM observed increasing interest in insurance for larger issues and bonds with higher underlying ratings in the third quarter, as well as robust opportunities to insure bonds in the secondary market,” Sean McCarthy, chief executive officer of BAM. “That allowed us to post solid growth without changing our conservative underwriting standards and exclusive focus on insuring bonds from U.S. municipal issuers that provide essential public services. For the year to date, BAM has insured more than $2 billion of debt with underlying ratings in the double-A category, more than doubling the pace from 2019.”

He noted the mutual insurer sustained demand, particularly from institutional investors who chose to use BAM’s guaranty as a tool in their portfolio management and hedging strategies.

“That trend kept industry penetration above 8%, in line with the levels we saw in the second quarter, even as liquidity continued to recover from the initial days of the COVID pandemic,” McCarthy said.

McCarthy added that both total par and average transaction size of the green bonds verified under the BAM GreenStar program were up sharply."Year over year, from 13 transactions worth $105 million in Q3 2019 to 30 transactions worth $515 million in Q3 2020," he said. "For the year to date, BAM GreenStar par sold more than doubled to $850 million, outpacing the 64% growth in the municipal green bonds market overall reported by Refinitiv."