Northeast issuers sold $93.1 billion of municipal bonds in 2013, down 17.4% from 2012.

Full Year 2013 Northeast Statistics

The Northeast's decline was greater the 12.5% national decline, according to Thomson Reuters data.

Northeast issuance was $24.9 billion in the first quarter, $20.6 billion in the second, $18.7 billion in the third, and $28.9 billion in the fourth. The fourth quarter total was down only 3.5% from fourth quarter 2012.

The region includes 11 states, Puerto Rico and the District of Columbia.

Volume growth or decline varied markedly around the region. A government logjam over bonds in Maine broke up in 2013; the state's 30.5% growth was the biggest growth in the Northeast in 2013. Puerto Rico saw the region's greatest issuance decline at 81.6%.

The year's biggest issuers were New York City with $5.6 billion, Empire State Development Corp. with $3.3 billion, and Massachusetts with $3.2 billion.

The states with the greatest issuance were New York with $40.9 billion, New Jersey with $13.4 billion, Pennsylvania with $10.6 billion, Massachusetts with $8.8 billion, and Maryland with $6.5 billion. These totals include all forms of municipal bonds from all issuers.

Issuance in New York was down 16.5% from 2012. Perhaps half of the $8.1 billion in drop-off was due to restructuring sales that the Metropolitan Transportation Authority mainly did in 2012, said Lamont Financial Services president Robert Lamb.

Fourth quarter New York issuance was up 42.2%. New York state-level government, the MTA and New York City Municipal Water Finance Authority tend to do sales in the third and fourth quarters, observed Jim Tricolli, a managing director in RBC Capital Markets' municipal division.

While electric power muni bonds declined 19.1% in par value nationwide, New York's electric power sector rose 154.8%. Lamb said a $2.02 billion sale for the Long Island Power Authority was responsible.

Even though issuance from cities and towns nationwide was down 23.5%, issuance from New York's cities and towns was down 3.1%. Tricolli said this was because of New York City's enormous size and tendency to consistently sell large volumes.

In a down year nationally, issuance was up 25.4% in New Jersey. One reason was an $827 million deal that Rutgers University sold as part of its merger with the University of Medicine and Dentistry of New Jersey, said Noreen White, co-president of Acacia Financial Group.

New Jersey has two levels - a state-level and a local level, Tricolli said. The state level had a big year and this explained the overall rise in issuance in the state. Most of the state-level growth took place in the first half of the year. This growth was because state agencies aggressively sought large refunding opportunities in the low-interest rate environment prevailing then, New Jersey Treasury spokesman Bill Quinn said in the summer of 2013.

Superstorm Sandy led local governments to slow bond sales in 2013, Tricolli said. Instead they turned to non-bond based financing.

There are many callable bonds in New Jersey. Because of negative arbitrage, the issuers could not call them last year, White said. In 2014 there will be more refundings in the state. Overall, the market will not change much, she said.

Issuance in Pennsylvania was down 35% in 2013. The fourth quarter accelerated this decline, with a 55% year-over-year decline.

Tricolli pointed out that Pennsylvania sold large unemployment insurance bonds in 2012 and this contributed to the decline in 2013.

Many Pennsylvania bonds have five-year call provisions. Since 2008 was a slow year, 2013 was a slow year for refundings, Tricolli said.

While utility issuance was down 27% nationally, in Pennsylvania utility issuance was up 102%. Public Financial Management managing director Brad Remig said this might have been due to sewer utilities along the Susquehanna River and its tributaries having sold bonds to meet Chesapeake Bay clean-up requirements.

While education funding was down 3.2% nationally, it was down 23.1% state-wide. As part of the state's Act 1, Pennsylvania changed reimbursement funding for schools. This cut school district funding and has affected bond sales, Tricolli said.

Issuance in Massachusetts was down less than in the nation but was lower in the second half than in the first. Total volume was down 3.1% for the year. Whereas volume was $5.4 billion in the first half, it was $3.4 billion in the second.

Massachusetts state government issuance (apart from state agencies) bucked national trends, and jumped 64.8% to $3.2 billion.

Though healthcare issuance declined by 23.2% nationally, it increased 108.2% in Massachusetts. While utility issuance fell 27.6% nationally, it declined 52.1% in Massachusetts.

Maryland ended up 3.2% in a year that was negative nationally, largely because of a very active first quarter.

Most of the bond sales in Maryland, by par value, are done by a few large counties and by Maryland government, said Public Financial Management managing director Kathy Clupper. The fact that bond issuance is dominated by these big issuers who have steady capital needs may explain why the state sees less volatility in bond sales, she said.

Whereas taxable issuance was up 17% nationally, it was down 61% in the state. Baltimore County did a $256 million taxable pension obligation bond in 2012, said PFM senior managing consultant Linda Ginty.

Statewide, utilities issuance was up 130% in 2013, compared to a 27.6% drop nationwide. Ginty said Baltimore's utilities had not done a deal in 2012. Clupper said they did a refunding for $300 million in 2013.

Puerto Rico has generally been a major player in the Northeast. While $7.6 billion of munis were sold there in 2012, only $1.4 billion reached market in 2013 amid an increasing sense of financial crisis. The commonwealth government sold no bonds. The Puerto Rico Electric Power Authority sold $673 million in bonds in August.

The Highway and Transportation Authority sold a $400 million bond anticipation note in August 2013 with a 25 month maturity. The commonwealth government sold a $333 million Puerto Rico Sales Tax Corp. (COFINA) bond anticipation note in May 2013, with a 16 month maturity.

In the aftermath of downgrades by the ratings agencies, Detroit's bankruptcy, and negative stories in some prominent business publications, yields on the secondary market for Puerto Rico bonds rose substantially over the year. Analysts said the government's relative withdrawal from the market was a way to avoid having to pay high interest rates.

The regions' biggest senior managers remained unchanged from 2012: Bank of America Merrill Lynch in first, JPMorgan in second, Citi in third, and Morgan Stanley in fourth. Their combined market share increased to 53.6% from 49.8% by par value.

Among bond counsel firms in the region, Hawkins Delafield was first, Sidley Austin was second and Nixon Peabody was third, as was the case in 2012. However, Norton Rose Fulbright jumped to number 4 in 2013 from number 20 in 2012 by par value.

Through word of mouth or otherwise, Norton Rose Fulbright has increased its transactions in the region, said Bob Dransfield, the firm's U.S. head of finance. This past year the firm has been able to work on some larger deals. Dransfield said he was hopeful that the firm would have another strong year in the Northeast.

Wolf & Samson also had a good year, jumping to number 5 from number 12 among bond counsel firms.

The financial advisor rankings in the Northeast saw more changes. While Public Financial Management remained in first place, Lamont Financial Services slipped to third from second. Public Resources Advisory Group climbed to second from third.

Acacia Financial Group jumped to fourth from sixth place, improving its market share to 8.4% from 4.9%. Prager Sealy & Co. was in 8th place even though it was not even in the top 25 in 2012.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.