The municipal bond market capped a light year of issuance with a 6% drop in long-term volume in December.
Issuers floated $25.2 billion in 757 deals last month. That compared with $26.8 billion in 997 issues over the same period in 2012, Thomson Reuters numbers showed.
For the year, long-term muni volume fell 13%, to $329.8 billion in 11,267 deals, against $379.6 billion in 13,115 issues.
Municipalities pushed most of their deals for December through a window of just more than a week, as they lost roughly half of the month to the holiday season. Almost $11 billion
"That December was only down slightly, given the short number of weeks that we had available for issuance, is maybe a surprise," said Hugh McGuirk, who heads municipal investments at T. Rowe Price.
"One has to step back and remember that about 85% of December's issuance came over a 10-day period," added Sean Carney, BlackRock muni strategist.
A significant factor affecting total issuance numbers for 2013 involved the decline in refundings from 2012. Refi deals rose 72% in 2012 from one year earlier, then plunged this past year.
Climbing interest rates in 2013 made refundings less appealing. The 10-year triple-A yield vaulted 99 basis points last year, while the 30-year triple-A yield rocketed 133 basis points, Municipal Market Data numbers showed.
In 2013, refunding issuance fell 30% to $111.1 billion in 4,286 deals, from $158.2 billion in 6,219 issues in 2012.
Refundings fell 4% for the month of December. Municipalities issued $7.71 billion in 214 deals last month, versus $8.03 billion in 433 issues.
In contrast, new money issuance climbed in December, as well as in 2013 on the whole. Issuers floated $159.2 billion in 5,941 deals, against $148.8 billion in 5,702 deals, a 7% increase. For December, new money issuance rose 6%, to $16.3 billion in 500 deals, compared with $15.3 billion in 488 issues in 2012.
Themes established earlier in 2013 persist, and should dictate 2014 patterns, as well, Carney said.
"New money issuance is on the rise, pushing out the duration of average issuance," he said. "Rates have had an adverse effect on refundings, however those still showing net interest savings will continue to issue."
Volume numbers among most of the largest-issuing sectors fell in 2013. Transportation deals fell 12%, education bonds plunged 26%, health care dropped 38% and utilities plummeted 47%. Only general purpose bonds had an increase in issuance, at 34%.
Tax-exempt issuance fell 10% in December from a year earlier, to $21.5 billion from $23.8 billion. Taxable volume, however, rose 62%, to $3.35 billion from $2.07 billion.
Negotiated volume decreased 6% to $19.4 billion in December, from $20.7 billion one year earlier.
Issuers floated about 4% less in revenue bonds last month, at $17.5 billion. They also issued 9% less in general obligation paper over the same period, at $7.70 billion.
Fixed-rate issuance fell 2% last month, to $22.3 billion. Variable-rate short put debt tumbled by half in December, to $1.18 billion; meanwhile variable-rate long- or no-put debt climbed more than 2,200%, to $726 million from $31.5 million.
Insured
Gene Gard, co-portfolio manager of the Dupree Municipal Bond Fund Family, found it interesting that insured issuance rose 57% from the previous December, to $1.52 billion from $974 million.
"We haven't looked at many insured deals, but believe it's generally positive that insurance is coming back to the market," he said. "We don't believe in buying issues based on insurance alone, but a belt and suspenders never hurts."
Most state and local government issuers had declines in volume last month. This includes cities and towns, at 38%; districts, at 30%; and local authorities, at 3%. State agencies, though, saw an 18% increase in December over the same month in 2012.
Among state issuers, California took the pole position for the year, up from second place in 2012. Golden State issuance climbed 14% in 2013, to $48.5 billion from $42.5 billion in 2012.
New York issuers occupied the second spot last year, down from the top in 2012, on 17% less volume. The Empire State issued $40.6 billion in 2013, versus just under $49 billion one year earlier.
Issuers in Texas kept their hold on third place, also on 17% less in volume. The Lone Star State issuance slipped to $32.2 billion last year, against $38.6 billion in 2012.
New Jersey jumped to fourth place in 2013, from 10th, on 25% more volume. Issuers in the Garden State floated $13.4 billion last year, compared with $10.7 billion in 2012.
Florida slipped to fifth position, from fourth in 2012, issuing 26% less in volume. Sunshine State issuers registered $13.3 billion in deals in 2013, against $17.9 billion in 2012.
Five deals weighed in at more than $1 billion, and two topped $2 billion, in December. Of the month's seven largest issues, six arrived on Dec. 12, including the three largest.
Foothill/Eastern Transportation Corridor led the way with $2.27 billion in revenue bonds for Orange County, Calif. A $2.02 billion Utility Debt Securitization Authority revenue bond deal for the Long Island Power Authority followed.
The New York State Thruway Authority issued $1.60 billion in junior indebtedness obligations, filling out a busy last day of substantial issuance for the year.
