Municipal bond volume dropped 20.2% in April and finished under $30 billion for the third month in a row, as concerns about tax reform made issuers reluctant to hit the market.

Monthly volume fell to $28.31 billion in 815 transactions from $35.51 billion in 1,195 deals in April of 2016, according to data from Thomson Reuters. This year’s performance marks the fourth time that April volume has been lower than $30 billion, dating back to 2007.

“Volume is trending how we thought it would so far in the first half, as issuers have been reluctant to come to market as tax reform talks have had an impact,” said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management. “There is hope for upturn; I believe that since it looks like the top tax rate will stay at 35%, that’s a net positive for the market in a worst case scenario.”

Heckman said issuance may pull out of its rut after voters approved initiatives across the country that will come to market and help volume.

April refundings sank to $6.90 billion in 213 deals from $13.88 billion in 529 deals a year earlier, a 50.3% decline from the same period of time last year.

New money issuance increased 32.6% to $15.83 billion in 533 transactions from $11.94 billion in 550 deals in April 2016.

“Refunding volumes are down and the pick-up in new money issuance was not enough to offset this drop,” said Vikram Rai, head of Citi’s municipal strategy group. “Refundings are down because, first, issuers are wary of coming to the market during a period of policy related volatility, and second, the universe of bonds eligible to be refunded is shrinking rapidly.”

Rai predicted this pattern of new money preforming well, but not well enough to overcome the significant drop in refundings, will continue through the remainder of the year.

“As a result overall volumes will be lower this year versus last year,” he said.

Combined new-money and refunding issuance in April dipped to $5.59 billion from $9.69 billion a year earlier. Issuance of revenue bonds declined 22.7% to $16.63 billion, while general obligation bond sales fell 16.5% to $11.69 billion.

Negotiated deals dropped 15.3% to $22.01 billion, and competitive sales decreased by 20.7% to $6.12 billion.

Taxable bond volume was 58.5% higher to $3.41 billion from $2.16 billion, while tax-exempt issuance decreased by 25.2% to $24.33 billion. Minimum tax bonds decreased to $568 million from $839 million.

“Taxable volume picked up," said Heckman. "People are taking advantage of that market, which is very attractive, I think it’s a trend you will see continue and gain traction even more as time goes. Corporate America does not have a lot of triple and double A rated names anymore. With taxable munis you can upgrade your credit in your portfolio.”

The volume of deals wrapped with bond insurance was almost unchanged, with $2.08 billion in 146 deals compared with $2.07 billion in 163 deals a year earlier.

The only sector to post year-over-year increases was transportation, which improved by 50.2% to $3.03 billion in 33 transactions from $2.02 billion in 28 deals.

“The increase in transportation bond issuance is not surprising as there is a growing awareness that US transportation infrastructure requires investment," Rai said. "With that in mind, toll roads bond issuance is likely to continue to increase to fund the growing backlog of road and bridge infrastructure needs across the country.”

Volume fell for the other nine sectors with the biggest decrease in par amount in the education sector, which dropped to $7.89 billion from $12.94 billion.

As for the different types of entities that issue bonds, only three were in the green. State governments increased sales 33.4% to $3.21 billion from $2.40 billion, state agencies improved to $9.39 billion from $9.35 billion and direct issuers increased their deal total to $588 million from $113 million.

Volume decreased at least 13.7% for the other types of issuer. The biggest decline came from colleges and universities for the second straight month when it dropped 86.2% to $497 million from $3.59 billion.

California retained the status of top state issuer, as the Golden State sold $25.15 billion so far this year. New York was No. 2 with $13.25 billion with Texas right behind in third with $11.28 billion. Pennsylvania is next with $5.78 billion and Maryland rounds out the top 5 with $3.98 billion.

Rai said he expects about $34 billion of issuance in May, as recent events have served to desensitize the markets somewhat and now investors seem to shrug off statements from the administration regarding tax-reform.

Investors and issuers are awaiting the details of tax reform promised by the Trump administration, as lower tax rates or the elimination of the municipal tax exemption would make the bonds less advantageous.

“While they haven’t priced out the possibility of tax-reform, they seem to be adopting more of a wait and watch approach,” he said.

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