Municipal bond sales faltered in November's chilly market conditions, but still remained well above 1992 levels for the year, according to data extracted by The Bond Buyer from Securities Data Co.'s data base.
Rising interest rates and uncertainty about the U.S. economy pushed issuers away from the municipal market last month, reducing November's volume to $16.35 billion. That was 27% less than October's revised total of $22.46 billion, 3% less than the $16.84 billion figure for November 1992, and the lowest total for any month since February 1992.
"I think we've seen the worst month in a long time," said Robert Chamberlin, senior vice president of municipal research and marketing at Dean Witter Reynolds Inc. "The industry saw a tremendous erosion in prices and new issuance. I hope December doesn't get any worse. But if you speak with people on the street, I think you'll find lower expectations for December."
"This was our second taste of lower issuance," said George Fischer, a portfolio manager with Fidelity Investments. "Trouble in the Treasury market made November a poor month for returns on municipals, and that is a trend that is likely to continue and accelerate. However, that will lead us to better months for returns."
Despite last month's decline, new-issue volume for 1993 remains far above last year's levels. For the year to date, new bond sales total $261.23 billion, or 23% more than 1992's 11-month total of $212.24 billion.
Competitive bond sales, which have been rising in recent months, more than doubled in November, to $5.05 billion from $2.16 billion in November 1992, and accounted for 30% of the month's volume. Nine of November's issues of $100 million or more were sold competitively, including a $627 million Los Angeles Department of Water & Power sale that was the month's third-largest offering.
For the year to date, competitive deals have risen 23%, to $51.83 billion from $42.2 billion a year ago. The increase can be attributed to a growth in the size of competitively sold issues -- the number of such sales has risen only 4%, to 4,085 from 3,938.
"The higher competitive issues are a result of the scandals. Deals are coming competitively that normally would have been negotiated," Fischer said. "This is another trend that has a way to go. In 1994 we might see a shift towards competitives which will make it a very different environment for those of us on the buy side. It would change the game dramatically."
"The market has found religion in competitives," Chamberlin said. "But if you look at the numbers, it's still a negotiated market."
So far this year, negotiated deals have risen 24%, to $207.58 billion from $167.62 billion. In November, however, they fell 22%, to $11.28 billion from $14.52 billion.
Refundings have been the driving force for this year's surge in sales, but November's refunding total of $10.23 billion was only fractionally higher than November 1992's figure of $10.22 billion. Despite that slowdown, refundings have risen 58% this year, to $173.51 billion, or 66% of the overall volume, from $109.8 billion in the same period last year.
More refundings have been sold this year and last -- $296.26 billion -- than in the previous six years, 1986 through 1990, when $262.66 billion was refunded.
"We're seeing more refundings done by smaller issuers," Chamberlin said. "These are the last people through the gate. We're definitely getting toward the bottom of the barrel."
New money sales were still dragging behind last year's levels. November's new money financing fell 7%, to $6.12 billion from $6.61 billion in November 1992, and the year-to-date figure of $$87.72 billion is 14% less than the 11-month total of $102.43 billion for 1992.
"It's obvious we're not going to hit $100 billion in new money this year," Chamberlin said.
The leading purpose for municipal financing last month was utilities, which skyrocketed 134%, to $3.7 billion from $1.59 billion in November 1992. Through 11 months, utility financing has risen 44%, to $34.28 billion from $23.79 billion. Last month's largest deal was a $1.03 billion sale by the New York City Municipal Water Finance Authority, and three of November's five largest issues were for utilities.
Education, the leading purpose for the year as a whole, rose a meager 3% last month, to $2.8 billion from $2.73 billion. For the year to date, education financing is up 20%, to $43.4 billion from $36.18 billion.
Transportation nearly doubled last November's total, rising to $1.76 billion from $908 million a year ago. For the year, however, transportation is up a modest 5% to $26.29 billion from $24.99 billion.
"We did do relatively well last month in some areas," Chamberlin said, "such as education, because of a real demand for financing, and transportation and utilities. In those areas, it's a combination of available money and federal regulations for water and sewer ... Those three areas could be very important for 1994."
Every other specific category was down last month from November 1992, led by an 88% decline in electric power, to $242 million from $2.04 billion. Health care plunged 42% to $1.3 billion from $2.24 billion; public facilities fell 55%, to $313 million from $702 million; industrial development was off 33%, to $435 million from $652 million; and environmental financing slid 1%, to $1.01 billion from $1.02 billion.
The catchall category of general-purpose and multipurpose issues declined about 8% in November, to $3.88 billion from $4.19 billion. For the year it is up 15%, to $63.15 billion from $54.84 billion.
Securities Data's figures are preliminary and usually subject to substantial revisions. For instance, October's bond volume figures rose more than $2 billion from the $20.22 billion figure first reported on Nov. 2.
The data 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.
