Issuance dipped in August as mixed economic data caused Federal Reserve uncertainty and kept issuers on the sidelines while the number of megadeals fell.
August volume was $48.465 billion, a 4.8% decrease from $50.933 billion last year.
Issuance year-to-date is $386.689 billion, up 14.9% from $336.478 billion over the same period in 2024.
Part of the drop in issuance stemmed from uncertainty over the Fed as market participants wait to see what it will do at its September meeting, where a 25- or 50-basis point cut could be in play, said JB Golden, executive director and portfolio manager at Advisors Asset Management.
Most of the uncertainty over the Fed comes from mixed economic data, which makes it hard to judge how the economy and labor markets are doing, he said.
"We got strong GDP, PCE ticked back up. But then we had a jobs number back in July that has really got the Fed scared, and we have a really weak print expected this Friday. So there is a tremendous amount of uncertainty in the economic data," Golden said.
Given all the news and releases, it is a challenging environment for issuers to approach the market, said Tim Iltz, fixed income credit and market analyst at HJ Sims.
Additionally, megadeals usually help buoy monthly issuance, but the "billion-dollar deal bonanza" took a break in August compared to previous months, said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.
No single series topped $1 billion in par value, though New York City and the New York City Transitional Finance Authority came to market with billion-dollar-plus deals across various series, as did Illinois, she said, while several other issues were sold above $500 million.
"The limited scope of the megadeal may have helped spread issuance around more categories, lending support to generic benchmark yields," Olsan said.
Furthermore, some of the issuance this year came from "fringe sectors," like high-yield and some of the riskier ones, Iltz said.
However, there was some difficulty selling a lot of those issues during August, he noted.
These parts of the market can historically get "satiated" fairly quickly due to the robust demand out there, Iltz said.
Buyers who typically come out for those deals, though, have enough paper from a lot of those sectors, and so there was a bit of a pause "in terms of trying to space not only transactions out, but to try and also gauge demand from investors, because nobody wants to have their deal go day-to-day," he said.
This year has seen record issuance and that should continue into year-end, according to Iltz.
Despite this, the market faces challenges in the coming months, including mixed signals from the labor market and the direction of the economy, he said.
Heightened economic sensitivity will not stop projects and the need for issuers to tap the capital markets, Iltz said.
August issuance details
Tax-exempt issuance ticked down 2.2% to $43.18 billion in 752 issues from $44.168 billion in 875 issues a year ago. Taxable issuance dropped 24.4% to $2.319 billion in 61 issues from $3.066 billion in 54 issues in 2024. AMT issuance was $2.966 billion, down 19.8% from $3.699 billion in 2024.
New-money issuance rose 4.9% to $35.158 billion from $33.512 billion, while refundings were up 33.1% to $7.808 billion from $5.865 billion.
Revenue bond issuance dipped 2.3% to $30.752 billion from $31.461 billion in August 2024, and general obligation bond sales fell 9% to $17.713 billion from $19.472 billion in 2024.
Negotiated deal volume was down 5% to $39.446 billion from $41.506 billion a year prior. Competitive sales rose 3.3% to $8.571 billion from $8.295 billion in 2024.
Bond insurance rose 30.8% to $5.026 billion from $3.843 billion.
Bank-qualified issuance decreased 24.8% to $658.7 million in 168 deals from $875.9 million in 224 deals a year prior.
California claimed the top spot year-to-date among states.
Issuers in the Golden State accounted for $56.869 billion, up 12.9% year-over-year. Texas was second with $53.772 billion, up 9.9%. New York was third with $43.905 billion, up 15.7%, followed by Florida in fourth with $17.097 billion, down 10.2%, and Wisconsin in fifth with $13.616 billion, a 73.3% increase from 2024.
Rounding out the top 10: Pennsylvania with $12.295 billion, up 67.4%; Massachusetts with $11.828 billion, up 10.5%; Washington with $10.497 billion, up 8.3%; Illinois with $10.379 billion, up 12.1% and Colorado with $9.678 billion, up 37.3%.
