Northeast bond issuance was stronger in the first half of 2014 than it was in the United States.
Whereas bond issuance was down 13.3% in the United States by par value to the first half of 2014 from the first half of 2013, it was down just 6.6% in the Northeast, according to Thomson Reuters data.
In the second quarter Northeast issuers sold 12.1% more bonds by par value than in the second quarter of 2013, whereas in the U.S. 3.7% fewer bonds were sold from one quarter to the other.
Issuance was $19.4 billion in the first quarter and $23.1 billion in the second quarter. The region includes 11 states, Puerto Rico and the District of Columbia.
The region's biggest issuers were the Commonwealth of Puerto Rico with $3.5 billion, the New Jersey Economic Development Authority with $1.229 billion, and the New York State Dormitory Authority with $1.157 billion.
In recent years, issuance in the region's states have shown wide swings from year to year and this was even more the case than normal in the first half of 2014. Connecticut, the District and Puerto Rico had marked increases, New York was basically constant, and all the other states had declines.
Puerto Rico's issuance exploded 950.1% by par value in the first half based solely on the half's largest issue, a $3.5 billion general obligation bond sold on March 11. The District's and Connecticut's volume went up 117% and 52.6%, respectively.
Vermont's bond sales plummeted by 93%, the region's greatest decline. Rhode Island, New Jersey, New Hampshire, Maine, and Delaware all saw declines greater than 40%.
The states/entities with the largest issuance were New York with $15.7 billion, New Jersey with $5.3 billion, Pennsylvania with $5.1 billion, Massachusetts with $4.4 billion, and Puerto Rico with $3.5 billion.
New York's was down just $6.7 million or 0.04% from the first half of 2013. However, the number of issues was down 20.7%.
The state's strong showing in comparison to the United States was due largely to the state having 27.2% more issuance in the second quarter than it had in second quarter 2013.
New York's relatively greater issuance may have been because the state's economy is stronger than elsewhere, said Richard Tortora, president of Capital Market Advisors LLC. It may also have been due to New York's infrastructure being older than that of many parts of the country and thus in greater need of replacement.
In the first half New York housing issuance went up 2.5% while in the United States it declined 39.8%. Tortora said there was a greater demand for housing in the state than elsewhere in the country.
State agency volume went up 42%, different from the 17.9% drop found nationally.
Tortora said that as long as the economy continues to be healthy, he expected New York's volume to increase in 2015.
New York's neighbor across the Hudson River, New Jersey, saw volume plummet 43.7% in the half compared to the first half of 2013. New Jersey had a 77.3% drop in the first quarter but only a 5.7% decline in the second quarter.
The first quarter of 2014 was down compared to the first quarter of 2013 partly because state agencies did a lot of refundings in early 2013 to take advantage of low interest rates, said Dave Thompson, chief executive officer of Phoenix Advisors.
In New Jersey transportation bond volume was down 67.2% in the first half of 2014 while it was up nationwide by 23.8%. The state's Transportation Trust Fund has had its problems and these have gotten worse, Thompson said. The problems have had a negative effect on transportation volume.
State government issuance fell to zero in the first half of 2014 and state agency issuance fell by 43.3% in the same period. The state's budget problems led both the state and the state agencies to sell fewer bonds, Thompson said.
New Jersey's counties had a 95% increase in par value volume in the semester, compared U.S. counties that saw a 26.8% decline. The state's cities and towns sold 37.4% less in the first six months of 2014, while those in the U.S. sold 10.2% more. Thompson said that his firm hadn't noticed the decline from the municipalities. Some of the largest cities may have curbed their sales, he suggested.
To New Jersey's west, Pennsylvania saw a modest 1.2% decline in volume in the first half. This was aided by a 16% jump in par value in the second quarter.
The state had a lot of refunding bonds sold in the first half of 2013 and increased interest rates greatly reduced this, said Jaime Doyle, managing director of Public Financial Management. To make up for the cutback in the second half of 2013 issuers in the state sold more in the first half of 2014, allowing the state to have a much smaller decrease this year than what was typical nationwide, she said.
Transportation issuance in Pennsylvania was up 50.9% in the first half versus 23.8% in the country. In the same period utility issuance was down 73.3% in the state as compared to down 20.6% in the United States.
Also in Pennsylvania, state agency volume was up 37.1% while in the country volume went down 17.9%.
Pennsylvania cities and towns sold 58.8% more in par value in the semester, substantially more than the U.S. city and town 10.2% increase. Some of PFM's clients have seen increases in transfer and other tax revenues recently and this has led them to consider starting projects involving borrowing, Doyle said. Doyle said she was optimistic that there would be more of this in the near future.
The fourth ranked state in the Northeast, Massachusetts saw total issuance decline by 18.5% in the first half.
Whereas volume went down just 3.7% nationally in the second quarter, it went down 21% in Massachusetts.
In the state healthcare issuance was up 84% in the half, while in the U.S. it was down 28%. The par value of utility bonds went up 80.3% in the state even as it went down 20.6% in the U.S.
Massachusetts state government sold 65.6% less in par value in the half, dropping to $490 million from $1.425 billion, according to Thomson Reuters.
Colin MacNaught, assistant Massachusetts treasurer for debt management, said the state closed on $1.089 billion in bond sales the first half of 2014. He also noted that the state sold $400 million on June 30. Since this bond closed in July, Thomson Reuters did not count it in the totals.
In the spring the state launched a rolling offering program called MassDirect Notes. Through the program the state has been offering bonds to retail investors five days a week in each of the last two weeks of the month.
The state started the program on March 17 and reached its goal of selling $250 million in July, a month earlier than expected, MacNaught said. The state will take a pause in the program in August and then restart it.
Puerto Rico was the fifth biggest state/entity for issuance in the half. All of its issuance came from a single commonwealth $3.5 billion bond sold on March 11. The bond was the country's biggest in the half and the biggest speculative grade municipal bond in U.S. history. Puerto Rico had $16 billion in orders but still had to pay 8.75%.
The commonwealth has stated it expects the island's municipalities to sell a $500 million COFIM sales tax backed bond similar to COFINA this fiscal year. With various developments affecting how attractive people see its bonds, the commonwealth's bond plans have changed in the past and may change in the future.
Who the region's largest senior managers by par value were, shifted some from the first half of 2013. Barclays jumped to second place from seventh place, having benefited from being the lead underwriter of the Puerto Rico deal. Bank of America Merrill Lynch continued in first place. JPMorgan slipped to fourth from second and Morgan Stanley climbed to third from fourth.
The top bond counsel firms in the Northeast were Hawkins Delafield in first, Sidley Austin LLP in second, Greenberg Traurig in third, and Edwards Wildman in fourth. In the first half of 2013 Sidley had been eighth and Greenburg had not been in the top ten. Greenburg's work for the Puerto Rico deal put it in third.
The region's top four financial managers by par value advised were, in descending order, Public Financial Management, Public Resources Advisory, the Government Development Bank for Puerto Rico, and FirstSouthwest. PFM was also first in the first half of 2013, PRA had been third, the GDB was not among the top 10, and FirstSouthwest had been second.
