Bolstered by low interest rates, municipal bond volume continued to rise at an impressive rate through May, rising 18% to $55.69 billion from $47.12 billion a year ago, led by significant increases in electric power, public facilities, and environmental issues, according to figures compiled by Securities Data Co./Bond Buyer.

In addition, both new-money and refunding issues posted double-dig-it increases. New-money issues rose 12%, to $43 billion in the first five months of 1991, from $38.38 billion in the year-ago period, while refundings jumped 46%, to $12.7 billion from $8.7 billion.

The nation's recession has caused a deterioration in credit quality. Uninsured, triple-A-rated municipal bond volume declined significantly over the first five months, while Baa/BBB-rated bond issuance jumped.

In the first five months of 1991, uninsured bonds rated Aaa by Moody's Investors Service fell 26%, to $3.61 billion, or 8% of total issues rated, from $4.88 billion, or 14% of rated issues. Uninsured bonds rated AAA by Standard & Poor's Corp. dropped 37%, to $3.18 billion, or 7% of rated bond volume, from $5.05 billion, or 14% of rated volume.

Also, issues backed by bond insurance were up significantly from the first five months of 1990, rising 29% to $16.7 billion, or 30% total volume, from $12.92 billion or 27%.

The $13.33 billion issued in May is the largest dollar volume for that month since 1986's $13.58 billion, and the second-highest on record. In fact, the monthly volume for each month so far this year has either been the largest or second-largest total on record.

Securities Data's figures are preliminary and subject to revision. They are based on long-term bonds maturing in 13 months or longer. Private placements are included, but remarketings and taxable issues sold by private nonprofit organizations are excluded. The Bond Buyer compiled the figuress from Securities Data's data base on June 2, so issues not reported by that date are excluded.

Bonds used to finance municipal electric power projects more than doubled to $3.52 billion from $1.72 billion a year earlier. Through May, 17 power bond issues exceeded $50 million, including four last month, led by a $117 million offering by M-S-R-Public Power Agency in California.

Environmental issues rose 23%, to $2.34 billion from $1.9 billion last year. A 72% surge in pollution control bonds, to $1.59 billion from $927 million, wiped out a 24% drop in solid waste disposal financing, to $745 million from $976 million.

Public facility issues jumped 68%, to $2.48 billion from $1.48 billion in the year-ago period. Correctional facilities, which consist of prisons and police stations, sky-rocketed 125%, to $835 million from $371 million. Bonds used for recreation, including stadiums, civic centers, and parks, jumped 88% to $1.22 billion from $649 million.

Education remained the leading specific purpose for municipal financing, with a 12% increase in the January through May period, to $10.05 billion, or 18% of total municipal issuance, from $8.96 billion, or 19% last year.

Bonds used for general- and multiple-purpose financing, soared 48% to $15.68 billion from $10.57 billion. In May, 12 of the 70 issues of $50 million or more were listed as various purpose bonds. The three largest issues sold so far this year -- $1.26 billion by California, $1 billion by New York City, and $910 million by the New York Local Government Assistance Corp. -- were all general-purpose issues.

Utilities increased 19%, to $6.2 billion from $5.2 billion.

Gains posted by those purposes more than offset declines in every other specific purpose. Health care was down 7%, to $4.86 billion from $5.2 billion; transportation volume fell 9%, to $4.77 billion from $5.24 billion, led by a 53% drop in airport volume. Last May, Denver brought $700 million of airport bonds to the market; housing was off 19%, to $4.17 billion from $5.15 billion; and industrial development decreased 4%, to $1.62 billion from $1.69 billion.

Falling revenue and increased spending throughout the 11-month recession had a deep impact on the credit quality of state and local issuers' debt.

At the same time, bonds rated Baa by Moody's were $3.14 billion from $2.06 billion, an increase of 52%. Bonds rated triple-B by Standard & Poor's surged 70%, to $3.1 billion from $1.82 billion. Moody's noted that it revised 56 ratings downward in the first quarter of this year, which affected about $18 billion of debt. However, $16.5 billion of that amount was for the lowering of New York City's general obligation debt.

Taxable municipal bond issuance rose 31% in the first five months, to $950 million from $724 million. Bonds subject to the alternative minimum tax dropped 39%, to $4.6 billion from $7.53 billion, primarily because of the decline in airport and single-family housing issues.

Bonds issued through negotiated sales and competitive bids both rose about 19%, to $39.13 billion and $16.02 billion, respectively, from $32.94 billion and $13.44 billion. Private placements dropped 28% to $534 million from $738 million.

GO bond sales were up 26%, to $19.68 billion from $15.67 billion, while revenue bond volume increased 15%, to $36.01 billion from $31.45 billion.

Bonds secured by letters of credit were down 15%, to $2.74 billion from $3.24 billion, and issues backed by insured mortgages or collateralized by mortgage securities plunged 47%, to $1.14 billion from $2.13 billion.

Variable-rate financing declined 17%, to $3.01 billion from $3.61 billion.

Municipal bonds sold by state governments jumped 36%, to $6.99 billion from $5.15 billion, and state agency issues rose 2%, to $13.92 billion from $13.66 billion.

Bonds issued by municipalities increased 26%, to $23.48 billion from $18.7 billion, while local authority sales were at $9.94 billion up 12% from $8.91 billion last year. Bond sales by public colleges and universities almost doubled to $1.36 billion from $689 million.

California issuers were the most active through May of this year, bringing $8.21 billion to market, up 28% from $6.44 billion last year. New York issuers came in second, with a 17% increase, to $6.55 billion from $5.62 billion. The two states together accounted for about 27% of the total volume.

Nex came Texas, with a 56% jump, to $4.86 billion from $3.12 billion; Pennsylvania more than doubled to $3.88 billion from $1.9 billion; and Florida, up 80%, to $3.03 billion from $1.68 billion.

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