WASHINGTON Dec 21 Issuance of U.S. municipal
bonds will likely rise by 9 percent to $458 billion in 2013, as
investor demand for the debt sold by states, local governments
and other public groups remains strong, the leading market
organization said on Friday.
In its annual survey, the Securities Industry and Financial
Markets Association found that issuers will likely sell $65
billion in short-term notes next year, compared with $55.6
billion in 2012, and $393 billion in long-term debt, compared
with $364.7 billion this year.
The group also forecast issuance of long-term alternative
minimum tax bonds to rise to $13 billion. Variable-rate demand
obligation issuance will likely increase, as well, to $15
billion from a 20-year low of $11.9 billion this year, SIFMA
Throughout 2012, yields in the $3.7 trillion municipal bond
market have scraped record lows, prompting issuers to sell new
debt and also refinance existing bonds. The lower interest
payments have not driven away investors, though.
"With the country's economy slowly, but steadily recovering,
we're continuing to see a strong appetite for municipal bonds
among investors," said Michael Decker, managing director and
co-head of SIFMA's Municipal Securities Division, in a
statement. "Our forecast remains highly dependent upon the
outcome of the fiscal cliff negotiations and the fate of the
tax-exempt status in the tax reform debate coming next year."
The threat to the exemption given taxpayers for interest
paid by municipal bonds has grown stronger in the last few
months, with members of Congress suggesting capping the
exemption during negotiations on the "fiscal cliff."
While the federal government is seen likely to reach a deal
to avert the automatic tax increases and spending cuts that make
up the cliff, many in the municipal bond market expect the
desire to shrink the deficit will bring the threat to the
surface again in the new year.