Long-term municipal bond sales for 1993 approached the $200 billion mark last month, as another decline in interest rates spurred a late-month surge in refundings.
State and local governments sold $193.97 billion of bonds in the first eight months of 1993, up 27% from $152.81 billion in the same period a year ago. That makes this year -- with four months left to go -- the third-busiest on record, trailing only the 1992 record of $234.99 billion and the 1985 total of $206.99 billion.
Refundings carried the market in August, Just as they have done all year.
Issuers sold $14.23 billion of refunding bonds last month, lifting the year-to-date total to a record $130.21 billion. That amount represents a 66% increase from the $78.48 billion refunding figure for first eight months of 1992 and 7% above last year's 12-month record of $122.21 billion.
Refundings have accounted for two-thirds of this year's new-issue sales, and August was no exception: refundings last month totaled $14.23 billion, or 65% of the month's $21.79 billion volume.
Last month, yields on The Bond Buyer's weekly indexes hit their lowest levels in nearly 20 years. The 20-bond index of general obligation bond yields. for example, fell from 5.65% at the start of the month to 5.35% on Aug. 26, the index's lowest level since March 14, 1974. Since July 1992, when refundings began to dominate the primary market, the 20-bond index has dropped 103 basis points.
Nine of last month's 10 largest issues were refunding or new-money/refunding sales, and five of them, led by a $1.13 billion New York State Power Authority issue, were sold after Aug. 19.
Although traders, dealers, and analysts have said throughout the year that the level of refundings has to slow down it appears that will happen later rather than sooner.
"There are a finite number of refundings that can be done," an analyst said. "But if rates keep going lower, they'll continue to be brought into the market."
"The market itself had a very good performance, although last month was the first significant step-down in monthly volume compared with a year ago," said Robert Chamberlin, senior vice president of municipal research and marketing at Dean Witter Reynolds Inc. "The future prospects for refundings right now are unknown, but they are a little dimmer."
New-money deals have been shunted aside this year, failing 14% to $63.75 billion in the first eight months from $74.33 billion a year earlier. The decline has been attributed to a slowly growing economy, and tight state and local government budgets.
State and local authorities accounted for two-thirds of the increase in this year's new-issue volume. State agency bond sales jumped 37%, to $56.62 billion from $41.14 billion a year ago, while local authority issuance rose 48%, to $38.31 billion from $25.95 billion. Municipalities increased their sales 15%, to $75.68 billion from $65.66 billion, while state governments also raised their sales 15%, to $19.88 billion from $17.28 billion.
Revenue bonds, which make up most of the market, rose 34%. to $129.84 billion from $97.19 billion a year ago. General obligation bond deals rose 15%, to $64.12 billion from $55.62 billion.
Most of the purpose sectors continued to post healthy increases in bond sales, with only two sectors -- housing and industrial development -- showing declines. Housing bonds were off 35%, to $7.24 billion from $11.17 billion -- led by a 63% plunge in single-family housing, to $3.1 billion from $8.36 billion, resulting primarily from the sunset of tax exemption for mortgage revenue bonds on June 30, 1992. Industrial development deals are down 7% to $4.32 billion compared with $4.65 billion in the year ago period.
"There should be some hope for the housing and industrial development sectors," an analyst said. "They could add materially to new-issue paper as we move away from the over-reliance on refundings."
Education, the largest specific purpose category, rose 18%, to $32.52 billion from $27.62 billion. Electric power jumped 97%, to $21.66 billion from $11.02 billion. Utilities rose 49%, to $24.97 billion from $16.76 billion, led by last month's $1.16 billion Philadelphia utilities issue. Transportation financing slowed sharply last month, but the year-to-date figure of $19.99 billion remains 7% above $18.67 billion in 1992. Health care increased 42%, to $19.82 billion from $13.98 billion. Public facilities soared 96%. to $10.24 billion from $5.23 billion. And environmental facilities climbed 26%, to $5.87 billion from $4.67 billion.
Securities Data's bond volume figures are preliminary and subject to substantial revision. For instance, July's bond volume figures were increased nearly $2 billion, to $23.78 billion from the $21.98 billion published in The Bond Buyer on Aug. 3.