Sales of new municipal bonds, spurred by lower interest rates, jumped 21% in the first six months of 1991, to $74.07 billion -- the highest total ever for a first half, according to figures compiled by Securities Data Co./Bond Buyer.
The $12.63 billion increase in new-issue volume, up from $61.44 billion in the first half of 1990, resulted from strong gains in both new-money and refunding issues. New-money financing rose 19%, to $56.76 billion from $47.6 billion, while refundings jumped 25%, to $17.31 billion from $13.84 billion.
Low interest rates have provided a spur to the refunding market. The Bond Buyer's 20-bond index of general obligation bonds fell to its lowest level in four years on Feb. 14, when it was 6.81%, and it has not moved above 7.19% since. In the first half of 1990, the 20-bond index moved in a range of 7.20% to 7.54%.
Bond sales were particularly strong in May and June, settings records for both months. May's volume rose 24%, to $15.25 billion from $12.26 billion last year, and June's sales increased 11%, to $15.71 billion from $14.2 billion. So far this year, only January posted a decline from 1990, and that was only a 2% drop.
Securities Data's figures are preliminary and subject to revision. The long-term figures are based on securities with final stated maturities of 13 months or longer. Private placements are included, but remarketings of outstanding debt and taxable issues sold by private non-profit organizations, such as private colleges and electric cooperatives, are excluded.
Bond sales for education, the leading specific purpose for municipal financing, rose 14% in the first half of 1991, to $13.68 billion from $12.03 billion. Education's share of the market dropped, however, to 18.5% of total issuance from 19.6% a year ago. The entire increase was in primary and secondary education, where sales jumped 32%, to $8.92 billion from $6.75 billion.
Municipal utilities became the second-leading purpose, with a 30% increase in volume, to $8.45 billion from $6.52 billion. Bonds used to finance electric power projects more than doubled, to $3.52 billion from $1.72 billion a year earlier.
Health-care issuance rose 16%, to $7.12 billion from $6.15 billion. A 19% increase in hospital issues, to $6.55 billion from $5.5 billion, offset a 12% drop in bonds for nursing homes and life care, to $574 million from $651 million.
Environmental issues soared 65%, to $3.7 billion from $2.24 billion last year, led by a 106% surge in pollution control bonds, to $2.31 billion from $1.12 billion. Solid waste issues rose 25%, to $1.4 billion from $1.12 billion.
Bond issuance for public facilities was up 24%, to $3.22 billion from $2.59 billion. New issues for jails and prisons soared 96%, to $1.1 billion from $560 million, and recreation issues rose 17%, to $1.55 billion from $1.33 billion.
Sales of general purpose and multipurpose bonds jumped 42%, to $19.81 billion from $13.91 billion. The three largest issues sold so far this year -- $1.26 billion by California, $1 billion by New York City, and $910 million by the New York Local Government Assistance Corp. -- were all general purpose issues.
Those increases more than made up for the declines in the three remaining purposes. Housing was off 15%, to $5.7 billion from $6.68 billion. Transportation fell 1%, to $6.61 billion from $6.55 billion, as a 37% increase in bonds for roads and highways could not make up for a 39% drop in airport volume. Industrial development decreased 8%, to $1.96 billion from $2.12 billion.
Declines in tax revenues and increases in spending throughout the recession had a deep impact on the ratings new issues received in the first half. New issues of uninsured bonds rated AAA by Standard & Poor's Corp. fell 27%, to $4.48 billion from $6.16 billion in the same period a year ago, and uninsured bonds rated Aaa by Moody's Investor Services fell 14%, to $4.89 billion from $5.7 billion. At the same time, municipal bonds rated Baa and below by Moody's jumped 85%, to $4.1 billion from $2.21 billion, and issues rated BBB and below by Standard & Poor's were up 20%, to $3.4 billion from $2.84 billion.
Meanwhile, the use of bond insurance jumped 34%, to $22.36 billion from $16.73 billion, and insured bonds' share of the overall market rose to 30.2%, from 27.2% a year ago.
Other credit enhancements did not fare as well. Bonds secured by letters of credit were down 31%, to $3.76 billion from $5.46 billion. Issues backed by insured mortgages or collateralized by mortgage securities plunged 42%, to $1.6 billion from $2.78 billion.
Taxable municipal bond issuance rose 15% in the first six months, to $1.33 billion from $1.16 billion. Bonds subject to the alternative minimum tax dropped 35%, to $5.86 billion from $9.04 billion, primarily because of the decline in airport and single-family housing issues.
Negotiated bond sales rose about 18%, to $52.26 billion from $44.18 billion, while competitive sales increased 26%, to $20.35 billion from $16.21 billion. Private placements jumped 31%, to $1.36 billion from $1.04 billion.
General obligation bond sales were up 30%, to $26.17 billion from $20.17 billion, while revenue bond volume increased 16%, to $47.89 billion from $41.27 billion.
Variable-rate financing declined 3%, to $4.77 billion from $4.94 billion.
Municipal bonds sold by state governments jumped 31%, to $8.13 billion from $6.22 billion, and state agency issues inches up 1%, to $19.23 billion from $19.04 billion.
Bonds issued by municipalities increased 35%, to $32.37 billion from $24 billion, while local authority sales were at $12.3 billion, up 9% from $11.26 billion last year. Bond sales by public colleges and universities more than doubled, to $2.02 billion from $915 million.
California issuers were the most active through june of this year, bringing $10.72 billion to market, up 34% from $7.99 billion last year. New York issuers came in second with a 12% increase, to $9.28 billion from $8.26 billion. The two states together accounted for about 27% of the total volume.
Next came Texas with a 49% jump, to $5.36 billion from $3.59 billion; Pennsylvania, up 82%, to $4.66 billion from $2.56 billion; and Florida, up 48%, to $3.97 billion from $2.68 billion.
