February 1, 2018 / 9:56 PM / in 18 days

U.S. municipal market supply drops to $19.57 bln in January

Feb 1 (Reuters) - U.S. states, cities, schools and other issuers in the municipal market sold only $19.57 billion of debt in January, the lowest supply for that month since 2014, according to Thomson Reuters data on Thursday.

Issuance plummeted after nearly $58.2 billion of debt hit the $3.8 trillion market in December. Fears that federal tax legislation would terminate certain types of tax-exempt bonds sparked a rush by many issuers to sell debt. That resulted in record-high supply for the month of December.

The final bill, signed into law in late December by President Donald Trump, did not eliminate a federal tax break for private activity bonds typically sold to finance hospitals, affordable housing and other projects. But the law ended a practice used by most muni issuers to refinance bonds on a tax-exempt basis beyond 90 days from their call date for interest rate savings.

January supply was also hit by the postponed pricing this week of a $1.39 billion deal from Pennsylvania’s Commonwealth Financing Authority. The revenue bond issue, backed by Pennsylvania’s share of a multi-state settlement with U.S. tobacco companies, was aimed at raising money for the current state budget.

A spokesman for Governor Tom Wolf said this week that the bond deal would be completed in February. (Reporting By Karen Pierog in Chicago and Stephanie Kelly in New York; Editing by David Gregorio)

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