Insured muni issues stay scarce despite deals jump

July 13 (Reuters) - The dollar value of U.S. municipal bonds covered by insurance rose by more than one-fifth in 2012's first half, but insured issues remained a small fraction of new debt sold by state and local governments, Thomson Reuters data showed on Friday.

Assured Guaranty Municipal Corp, the market's sole insurer, secured $7.7 billion of the $191.7 billion of muni debt sold in the first six months of 2012 -- an increase in value of nearly 21 percent from 2011's first half.

Insured bonds, which accounted for 57.3 percent of issuance in the $3.7 trillion tax-free debt market in 2005, sank to just 5.5 percent of issuance in 2011 after last decade's financial crisis stripped insurers of their coveted triple-A ratings and drove some out of the business.

Letters of credit backed $2.47 billion of debt sold in 47 deals during the first half, down 6.7 percent from the same period in 2011. Citibank was the top provider, accounting for $550 million of the total, Thomson Reuters reported.

U.S. Bancorp was second at $439 million, and Wells Fargo & Co was third with $402 million, according to the data.

Orrick Herrington & Sutcliffe, last year's top bond counsel, led again in early 2012 and handled 213 deals valued at $16.3 billion in the first half. Hawkins Delafield & Wood LLP moved up a notch from a year earlier and was second in the bond counsel rankings with 194 deals worth $12.5 billion.