New municipal bonds sold at a torrid pace through the first nine months of 1991, hitting $119.14 billion after a 25% rise from $95.14 billion for the same period a year ago, according to figures compiled by Securities Data Co./Bond Buyer.
At this rate, volume for 1991 would reach $159 billion by the end of the year. That would be the second-highest total on record, surpassing 1986's figure of $151.3 billion and falling short only of 1985's record $204.28 billion.
In addition, short-term note sales already have reched their second-highest annual total to date, with sales jumping 25% from a year ago, to $36.35 billion from $29.17 billion. This year's note volume already exceeds the $34.33 billion issued in all of last year and is just 16% below the all-time record of $43.39 billion issued in 1982, when the U.S. Department of Housing and Urban Development was still selling billions of dollars of tax-exempt housing and urban renewal notes.
The municipal bond market enjoyed its second-busiest summer ever, as third-quarter sales jumped 30%, to $43.89 billion from $33.69 billion the year before. The biggest third quarter was in 1986, when issuers marketed $55.8 billion of bonds in July and August to beat the Sept. 1 effective date on the Tax Reform Act of 1986 and finished the quarter with $61.29 billion.
Refunding issuance, spurred by bond yields dropping to their lowest levels since March 1987, surged 46% in the first nine months of 1991, to $28.18 billion from $19.33 billion. Municipal bond yields, as measured by the average yield to maturity of the 40 bonds used to calculate the Bond Buyer Municipal Bond Index, fell 63 basis points during the period, from a high of 7.52% on Jan. 16 to a then-record low of 6.89% on Sept. 30.
New-money issues also reported a strong gain of 20%, to $90.96 billion from $75.81 billion.
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 and the short-term figures on securities maturing in 12 months or less. Private placements are included, but remarketings of outstanding debt and taxable issues sold by private nonprofit organizations, such as private colleges and electric cooperatives, are excluded.
Every purpose category, except one, posted gains in new-issue volume through the first nine months of 1991. Sales of general-purpose and multipurpose bonds climbed a sharp 46%, to $32.67 billion from $22.31 billion the year before.
Education remained the leading specific purpose for bond sales, rising 14%.2 to $19.61 billion from $17.17 billion, although its share of overall volume declined, to 16.5% from 18%. The entire increase came in primary and secondary education, which soared 35%, to $12.83 billion from $9.53 billion a year earlier. Higher education, on the other hand, fell 12%, to $6.71 billion from $7.61 billion.
Next came health care, which reported a 41% jump in volume, to $13.87 billion from $9.82 billion a year ago, and an increase of 1.3 of a percentage point in market share, to 11.6% from 10.3%.
Large increases were also posted for utilities, up 44%, to $12.21 billion from $8.49 billion; electric power, up 90%, to $6.4 billion from $3.37 billion; public facilities such as government offices and recreation, up 28% to $5.4 billion from $4.21 billion; environmental projects, up 44%, to $5.07 billion from $3.52 billion; and industrial development, up 27%, to $4.48 billion from $3.52 billion last year.
Housing Declines
Transportation reported the smallest percentage increase, 9%, to $10.04 billion from $9.23 billion. Its biggest sector, highways and streets, jumped 48.7%, to $3.94 billion from $2.65 billion, but airport issuance, a major sector last year, fell 28%, to $2.6 billion from $3.59 billion.
Housing was the only specific purpose for municipal financing to show a decline from 1990 levels, dropping 30%, to $9.4 billion from $13.5 billion. Virtually all of the decline was in single-family housing, which had posted a surge in sales last July and August ahead of the Sept. 1 sunset on tax-exempt bonds.
Sales of taxable municipal bonds soared 105% in the first nine months, to $3.03 billion from $1.47 billion a year ago. Issuers sold $1.7 billion of taxable municipals in the third quarter, headed by a $602 million California GO issue on Aug. 21.
Bonds subject to the alternative minimum tax plunged 45%, to $8.49 billion from $15.33 billion, primarily because of the decline in airport and single-family housing issues.
The 25% increase in short-term note sales was fueled by a $5 billion, or 22% rise, in general-purpose notes, to $28.14 billion from $23.14 billion. Sales in education, the other major purpose for note financing, rose 23%, to $5.45 billion from $4.43 billion.
State governments issued 22% more notes, pushing their total to $16.89 billion from $13.89 billion, and municipalities sold 21% more, rising to $15.14 billion from $12.54 billion.
California Leads
Tax and revenue anticipation notes, which accounted for about one-third of the volume, rose 17% in the first nine months, to $11.54 billion from $9.9 billion. Revenue anticipation note sales increased 16%, to $7.21 billion from $6.2 billion, and tax anticipation notes jumped 56%, to $5.56 billion from $3.56 billion. Bond anticipation notes, however, fell 5%, to $4.15 billion from $4.36 billion.
California remained the most active state for municipal bond sales in the first nine months of 1991, with a 54% jump to $18.34 billion from $11.91 billion last year. New York came in second with a 2% increase, to $13.65 billion from $13.44 billion, followed by Texas, up 61%, to $8 billion from $4.97 billion; Pennsylvania, up 89%, to $6.94 billion from $3.68 billion; and Florida, up 72%, to $6.58 billion from $3.83 billion.
Securities Data's bond figures for 1991 include 12 "municipal forward" sales, totaling $883 million. These are not actual securities sales, but are designed to advance refund deals otherwise prohibited from such transactions by federal tax law. Investors sign contracts agreeing to purchase bonds at some point in the future locking in current interest rates for an issuer. The delivery date usually corresponds to the first call on the outstanding issue.
Issuers sold $627 million of municipal forwards in their first year, 1989, and $676 million last year.
