As other sectors posted gains in the first six months of the year, the housing sector of the municipal new-issue market totaled an anemic $5.69 billion, a 14.7% decline from the $6.67 billion of housing deals in the same period last year, according to Securities Data Co./Bond Buyer.
The number of deals marketed also was down, to 267 from 285. Issuance peaked in May, when 70 deals raised $1.57 billion.
All told, monthly issuance consistently fell short of last year's. Only February, when 36 deals totaling $905 million were marketed, showed an actual increase over 1990 figures. February 1990 issuance totaled 36 deals worth $469.8 million.
Deterioration occurred in a number of areas: The issuance of bonds subject to the alternative minimum tax was down, as was the issuance of taxable debt. Fixed- and variable-rate deals both ebbed, with the $5.11 billion of fixed-rate deals 10.4% less than last year's $5.79 billion and the $582 million of variable-rate debt issued nearly 40% less than the $968 million that came to market in the first six months of 1990.
The issuance of housing bonds backed by letters of credit slumped 52.6%, and the mortgage-backed bonds fell 44.5%.
Use of bond insurance, however, rose. The $489.5 million of insured housing bonds that came to market made for a 34.3% increase from the $364.5 million sold in the same period last year.
Single-family issues also bucked the downward trend. With 156 issues totaling $4.183 billion, the single-family sector more than doubled last year's volume of $1.907 billion. Still, the number of last year's single-family deals was at 173.
Issuance by municipalities and local authorities also appears to be on the rise.
Analysts were at a loss to explain the declines in the market relative to last year, as well as relative to other market sectors. The continued prospect that mortgage revenue bonds' exemption from federal taxes could expire forever should continue to goad issuers to market, they said.
Richard J. Bowers 3d, a managing director in the public finance group at Merrill Lynch & Co., said the decline could stem from the fact that the Securities Data Co./Bond Buyer figures do not include remarketings.
"There were several issuers that have had remarketings this year of bonds originally structured in an escrow form in [19]88 or [19]90 in anticipation of the various sunsets. You may find, if you add in the remarketings, that the volume difference is not significant."
Merrill underwrote $1.075 billion of housing bond deals in the first half of the year, eclipsing former sector leader Goldman, Sachs & Co.
Goldman, Sachs & Co. served as senior manager on $887 million of housing bond deals, to place second for the six-month period. Bear, Stearns & Co., placed third among underwriters, with $434 million of deals.
Officials at the Massachusetts Housing Finance Agency said the prospect of state aid cuts had hindered the issuance of bonds for multifamily projects, which rely heavily on such aid payments.
Up until the signing of the state budget early this month, the agency did not know to what extent its multifamily programs would suffer fr m state cost-cutting.
"There's been a lot of uncertainty," said Kelley Chunn, a spokeswoman for the agency. "There was some reluctance to go out into the bond market," she said, adding, "We're right now evaluating what the impact of the budget is going to be on our multifamily programs."
