Bond volume

Triple-A yields rose more than three-quarters of a point on the front end and nearly half a point out long in September as munis posted 3.84% losses.

For the first three quarters, total issuance sits at $308.440 billion, down from $361.932 billion in 2021. Taxables are down 48.0% to $45.724 billion from $87.979 billion.

John Hallacy talks with Chip Barnett about how fiscal and monetary policy is affecting the municipal bond market. He discusses recent data releases, supply forecasts and the midterm elections and the future of ESG in public finance. (20 minutes)

Municipals saw more cheapening on the short end Friday as selling pressure persisted all week.

Many market players have revised their supply projections downward since rising interest rates have slowed down refunding and taxable volumes and general market volatility has stopped some issuers from participating.

Higher education borrowing led by century bond deals helped offset the dive in refundings brought on by rising interest rates.

Spreads on underwriting municipal bonds dipped to below $4 per $1,000 on issues in the first half of 2022 due to heavy competition and a shrinking volume of deals — the lowest figures reported in two decades.

Total volume in the first half of the year was at $209.718 billion in 5,153 deals, down 11.2% from the $235.836 billion in 6,793 over the same period in 2021, according to Refinitiv data.

Environmental facilities and public facilities saw the largest contraction in issuance.

New-issue volume grows to $10.7 billion led by a $2.7 billion taxable Massachusetts ESG deal, $1.35 billion of Oklahoma natural gas taxables, $1.25 billion from the Regents of the University of California and $1.1 billion from New York City.

Total July volume was $25.598 billion in 520 deals versus $37.573 billion in 1,013 issues a year earlier, according to Refinitiv data.

The top two bond insurers — Assured Guaranty and Build America Mutual — accounted for $17.132 billion of deals in the first two quarters.

For the first half of 2022, total issuance sits at $201.556 billion, down 14.5% from $235.836 billion in 2021. Taxables are down 46.8% to $31.024 billion from $58.338 billion.

Largely attributable to Fed interest rate increase-led volatility, outstanding municipal bonds lost $300 billion of market value in the first quart of 2022, a Municipal Securities Rulemaking Board report said.

More firms are revising issuance projections downward due to lower refunding and taxable volumes. Many participants say it is unlikely the market will hit issuance records reached in 2021 and 2020.

June redemptions will be the highest of the year at $50.6 billion. New-issue supply — 30-day visible is currently at $15.5 billion — is unlikely to keep up.

Total May volume was $31.167 billion in 750 deals versus $35.358 billion in 1,295 issues a year earlier. In a continuing trend, new-money issuance was up 14.2% in May year-over-year.

The rapid swing to lower yields over the past week has led to a sunnier outlook for the summer reinvestment season, but uncertainties on the economic front, rate volatility, and supply questions hang overhead.

Investors will be greeted Tuesday with a decrease in supply with the new-issue calendar estimated at $2.691 billion in $1.786 billion of negotiated deals and $904.9 million of competitive loans.

Deep-in-the-red municipal returns are not helping assuage investor concerns, creating a negative feedback loop that has yet to see a pause.