Overcoming a sudden sluggishness, the municipal bond market managed last month to reach a single-year record for new bond sales of $242.45 billion, according to data compiled from the data base of Securities Data Co.
With two months left in the year, new-issue volume surpassed the record set in 1992 of $235.11 billion for a calendar year. This year's 10-month total is 24% above the $195.41 billion figure for the same period a year ago.
The record was broken even though bond sales cooled off in October to $20.22 billion, down 13% from $23.62 billion in September and the lowest monthly total since February. Issuers sold $23.25 billion of bonds in October 1992. Only 771 issues came to market in October of this year, the smallest number since February 1991, when 686 issues were sold.
Refunding issues, which have been the driving force behind this year's record-setting sales, took a breather last month and fell to $12.39 billion. That was 15% below September's $14.57 billion, and the lowest monthly figure for refundings since November 1992. Despite the month's decline, year-to-date refundings remained well ahead of last year -- $161.01 billion as opposed to $99.58 billion.
New-money financing, which has been declining all year, fell sharply in October, to $7.83 billion from $13.08 billion in October 1992. Over the first 10 months of the year, new-money financing dropped 15%, to $81.44 billion from $95.84 billion in the same period a year ago.
"This is a concrete sign that the heaviest new issuance is past," said George Fischer, portfolio manager of Fidelity Investments. "From here, you'll see volume begin to slip month by month ... which, in turn, would be the start of very strong [price] performance of municipals versus Treasuries."
"This is a market-wide shift that occurred in October," said Robert Chamberlin, senior vice president of municipal research and marketing at Dean Witter Reynolds Inc. "We're still in a period of reconsolidation. What strikes me is, if this is a trend-line for November and December ... this could give us a weaker yearend, which hasn't occurred since I can remember."
"The month-to-month trend has been downward for new issues," said George Friedlander, managing director of portfolio strategy with Smith Barney, Harris Upham & Co. "That new-money number is worrisome -- down 40% is an extraordinary number.
"However, new money will come back. It's primarily been because of a slow economy, tight budgets, and taxpayer resistance. It will take it a while to get back, but there hasn't been, any crowding out by refundings."
Tax-exempt financing fell in October from year-ago levels for every specific purpose but one. Transportation issues led the decline with a drop of $790 million, or 30%, to $1.86 billion, followed by education with a decrease of $770 million, or 22%, to $2.78 billion.
Health care was the only category to post an increase, rising $520 million, or 24%, to $2.72 billion.
Curiously, competitive bond sales rose substantially in October, to an all-time record of $6.29 billion. That was 43% above September's $4.43 billion and 23% higher than October 1992's figure of $5.11 billion. The previous record had been $5.87 billion in March 1992.
"Some of that may be due to the political climate," Friedlander said. "Competitives have been making up a huge amount of the forward supply recently."
The competitive component of The Bond Buyer's 30-day visible supply, which measures upcoming issuance, averaged $3.07 billion in October -- half of the average total visible supply of $6.15 billion. That represents a substantial gain from its 39% market share in August and September and 30% for the January-July period.
The record volume for competitive sales resulted from an influx of larger issues. Only 387 issues were sold in October, down from 449 in October 1992 and well below the record 544 issues sold in August 1986.
Sales of taxable municipal bonds also set an all-time record for a calendar year last month, reaching $6.78 billion. That is 59% above the $4.26 billion figure for January-October period last year. The previous full-year record was set last year at $5.797 billion.
Four of the five biggest issuing states -- California, New York, Florida, and Pennsylvania -- already have posted record annual sales of $31.2 billion, $22.33 billion, $15.59 billion, and $12.86 billion, respectively. Texas, the fourth-largest issuer, reached $14.25 billion by the end of October well below its record of $21.51 billion in 1985.
The largest issue sold last month was $726 million of electric power refunding bonds by the Salt River Project Power and Agricultural Improvement District in Arizona.
Securities Data's figures are preliminary and usually subject to upward revisions. They include private placements and municipal forwards, but exclude taxable bonds sold by private nonprofit institutions, remarketings of outstanding variable-rate debt, and short-term notes maturing in 12 months or less.
