Lured by 1993's persistently low interest rates, issuers of long-term municipal bonds brought $235.92 billion to the market through Oct. 21, eclipsing in fewer than eleven months last year's record for new bond issuance of $235.05 billion.
With an extremely sluggish economic recovery and state and local governments strapped for cash, new money deals took a tumble from 1992's levels. The road to record highs was paved by refundings.
The entire surge this year has been driven by refundings, as major issuers -- primarily state and local authorities -- sought to rid themselves of the high coupon debt taken on in the early 1980s through refundings and take advantage of the lowest yields seen in almost 20 years.
The yield of The Bond Buyer's index of 20 general obligation bonds has averaged 5.64% through Oct. 22, 80 basis points lower than 1992's 6.44%.
Refundings through Oct. 21 were $155.21 billion, 26% higher than the record set in 1992 of $122.75 billion. Since last July, refunding volume is about $212 billion.
"We're on track to reach $290 billion to $295 billion," said George Friedlander, managing director of portfolio strategy with Smith Barney Shearson. "And it'll be a lot less next year. How much less? It's too early to say, but it will be a lot less."
Along with the new high for new issue long-term deals, several purpose categories have also already attained new highs.
Bonds sold to finance electric power projects are already at $25.87 billion, exceeding 1985's record of $19.37 billion by 34%. More than $22 billion of that amount was for refunded issues.
Utilities projects financing also set a record high two months before the end of the year. Utilities are at $28.96 billion, compared with 1992's previous annual high of $27.66 billion.
The other specific purpose category to set a record is public facilities, which include libraries and museums, correctional facilities and stadiums, and sports complexes. The sector smashed last year's record already by 42%, soaring to $12.87 billion from $9.08 billion.
And the largest specified use category -- education -- is not far from shattering the annual new issue record it set last year. Bonds sold for education are at $39.03 billion, less than 2% behind 1992's high-water mark of $39.68 billion.
In addition, revenue bond issuance also set a record, reaching $159.64 billion compared with $154.63 billion for 1992.
Insured bond volume is also at a record high at $83.31 billion, compared to $69.08 billion for 1992.