US Municipal Bond Credit Report, 3Q 2012

Long-term municipal issuance volume, including taxable and tax-exempt issuance, totaled $83.6 billion in the third quarter of 2012 according to Thomson Reuters, a decline of 26.9 percent from the second quarter ($113.4 billion) and an increase of 11.9 percent year-over-year ($74.7 billion). Year-to-date, municipal issuance totaled $275.1 billion, tracking the 10-year average closely ($281.4 billion year-to-date) and will close the year at approximately $384.2 billion if it remains on pace with the 10-year average (as it had done in the prior quarter).

Tax-exempt issuance totaled $67.9 billion in 3Q’12, a decline of 34.3 percent but an increase of 7.6 percent, respectively, from 1Q’12 ($103.4 billion) and 3Q’12 ($63.1 billion). AMT issuance totaled $4.9 billion in 3Q’12, an increase of 45.2 percent and 85.9 percent, respectively, quarter-over-quarter ($3.4 billion) and year-over-year ($2.7 billion). Taxable issuance increased $10.8 billion in 3Q’12, an increase of 63.3 percent and 53.9 percent, respectively, from 2Q’12 ($6.6 billion) and 3Q’11 ($7.0 billion). Part of the relatively large taxable issuance was due to a consolidated bond issue from the Port Authority of NY and NJ ($1 billion) and an additional $1.8 billion through refinancing of student loan-backed bond issues.

By use of proceeds, general purpose led issuance totals in 3Q’12 ($20.2 billion), followed by primary & secondary education $(12.4 billion), water and sewer facilities ($8.4 billion) and higher education ($6.0 billion).

Refundings, while still relatively elevated in the third quarter, declined slightly as a percentage of issuance (59.4 percent) compared to 2Q’12 (62.8 percent) but still above 2Q’11 (54.6 percent). Refundings will likely continue to remain elevated as true interest costs continue to slide to new lows for issuers; as of 3Q’12, municipal issuers enjoyed a dollar-weighted true interest cost of 2.49 percent in 3Q’12, compared to 2.82 percent in 2Q’12 and 3.10 percent in 3Q’11.

About the Report

The municipal bond credit report is a quarterly report on the trends and statistics of U.S. municipal bond market, both taxable and tax-exempt. Issuance volumes, outstanding, credit spreads, highlights and commentary are included.

Credits

SIFMA Research

  • Managing Director, Director of Research: Kyle Brandon
  • Director, Research: Sharon Sung

Municipal Division

  • Managing Director, Associate General Counsel, Co-Head: Leslie Norwood
  • Managing Director, Associate General Counsel: David Cohen
  • Managing Director, Co-Head: Michael Decker