Drop in refi deals dents October muni bond supply vs year ago
NEW YORK Oct 31 (Reuters) - Municipal bond issuance fell more than 25 percent in October from a year earlier as higher interest rates in the second half of the year have led to a decline in refinancing deals, preliminary monthly data from Thomson Reuters showed on Thursday.
New municipal bonds issued in October totaled $24.95 billion, compared with $33.81 billion issued in October last year. The decline was overwhelmingly due to a drop in refinancing deals, which fell by more than half, while deals raising new money rose by 20 percent.
While down from a year earlier, October's issuance was up by about 33 percent from September, which at $18.6 billion was the lowest monthly total since January 2012.
In the last two weeks of October $11.8 billion of supply came to market, versus $8.9 billion in the first half of the month. Credit market volatility during the first half of October, caused by the 16-day partial shutdown of the federal government and political standoff in Washington over lifting the U.S. debt ceiling, kept a lid on bond issuance.
Overall, muni bond issuance this year is running about 15 percent below where it was last year as rising yields curb issuers' enthusiasm and makes refunding less attractive.
Refunding in October fell to $10.11 billion compared with $21.45 billion in the same month last year, while new money entering the market grew to $14.84 billion compared with $12.36 billion a year ago.
Including private placements, new issues totaled $15.19 billion in October and refinancing totaled $10.25 billion. Total municipal issuance including private placements was $25.44 billion in October.
The yield on 10-year triple-A-rated municipal debt is currently around 2.4 percent compared with 1.7 percent at the same time last year, according to Municipal Market Data's (MMD) triple A scale. Rates started rising precipitously in May as investors believed the Federal Reserve would start winding down its bond-buying program, pushing bond prices lower.
October saw 742 new deals compared with 1,041 last year. Of those 284 were refinancing deals, down from 610 last year, and 458 were new money deals, slightly up on the 431 last year.
The dollar amount of new municipal bonds issued through the end of October fell 14.9 percent to $262.85 billion.
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