Updated results for December market volume showed only a slight change from preliminary numbers, as Thomson Financial data yesterday showed $29 billion of bonds were sold during December. Previous reports quoted the number at $28 billion.
The rise pushed year-end market volume to $429 billion, which is 5% higher than the previous record of $408 billion sold in 2005. The low yields, flat yield curve, and relatively stable market environment that characterized the municipal market during the first half of 2007 were a large part of why state and local governments sold so much debt.
The final two months of 2007 marked a significant slowdown in the pace of issuance, and December volume was down nearly 39% from the level set in the same month of 2006.
A drop in the volume of education bonds was the most visible reason for the December slowdown. Just $7.4 billion of school-related bonds were sold last months, as compared to $14 billion sold during December 2006. Education bonds are typically the largest source of primary-market volume.
The amount of bonds issued for utilities and transportation last month also dropped 70.9% and 69.1%, respectively, from the year-ago month.
New-money issuance dropped 34.2% year-over-year to $22.2 billion, while the level of refundings fell 66.5% to $3.5 billion.
The fourth quarter as the only part of 2007 that saw fewer bonds sold than the corresponding period of 2006. For the full year, the volume of education bonds and transportation bonds were roughly even with 2006’s total, while 3.7% more bonds we sold for utilities last year than during the year prior.
Housing finance agencies around the country accounted for a sizeable growth in taxable muni issuance during 2006, as they looked for ways to get funding outside their federally mandated tax-exempt volume caps. The amount of taxable debt dropped 3.2% last year, as housing markets around the country cooled.
About 30% of the bonds sold during December carried bond insurance, Thomson data showed. This was well below the 47% penetration rate for the full year and the 50% that have been insured since the beginning of 2000.