The municipal bond market is close to achieving its busiest year ever, with new-issue sales slipping only slightly in the third quarter of 1993, according to figures compiled by Securities Data Co.
As of Sept. 30, state and local issuers had sold $221.68 billion of new long-term bonds, up 29% from $172.23 billion in the first nine months of 1992. This year's figure is already the second-highest annual total on record, having surpassed the $206.99 billion figure for 1985, and it is less than $13.5 billion below last year's all-time high of $235.11 billion.
With $8.8 billion sold in the first half of October and interest rates at their lowest levels since the late 1970s, a new issuance record probably will be set by Halloween.
Refunding bonds have led the charge to market all year, outstripping new-money sales by nearly two to one. Issuers sold $147.52 billion of refunding bonds in the first nine months, up 65% from $89.41 billion in the same period last year and already a record for a single year. The surge more than made up for a 10% decline in new-money sales, to $74.16 billion from $82.82 billion.
Bond sales declined slightly in the third quarter from May and June's feverish pace. July's $24.47 billion and August's $25.35 billion both fell short of the records set in 1986, when issuers, compelled by the Sept. 1 effective date for the Tax Reform Act of 1986, sold $24.89 billion in July and $30.87 billion in August.
September 1993's $23.13 billion was a record for the month, but it was the smallest monthly volume this year since April.
Meanwhile, short-term note financing slackened considerably in the third quarter, to finish September at $38.28 billion for the year. That was 1% below the $38.65 billion figure for the nine-month period in 1992. Issuers sold $13.38 billion of notes in the third quarter, down 30% from $19.03 billion in the same period last year.
Education remained the largest specific purpose for long-term debt financing in 1993, with bond sales rising 25%, to $37.34 billion from $29.9 billion the year before.
The largest increase, however, was reported in the electric power sector, with sales jumping $13.06 billion, or 112%, to $24.76 billion from $11.7 billion. This year's electric power volume is already the highest on record, surpassing the previous peak of $23.19 billion set in 1985.
The second largest sector, utilities, posted a 42% gain from the year-ago period, to $27.65 billion. It was followed by health care, up 40%, to $22.99 billion; transportation, up 5%, to $22.46 billion; public facilities, up 115%, to $12.35 billion; housing, down 19%, to $9.86 billion; environmental facilities, up 34%, to $7.54 billion; and industrial development, down 15%, to $4.76 billion. That left $51.97 billion in the catchall "general purpose" category, up 18% from the year before.
Sales of taxable municipal bonds jumped 64% in the first nine months of 1993, to a record $5.97 billion from $3.63 billion the year before. Taxable financing rose in every purpose category except public facilities, and housing led the charge with a fourfold increase to $1.8 billion from $459 million the year before.
Bonds subject to the alternative minimum tax declined 20% in the first nine months, to $9.25 billion from $11.56 billion the year before. In the three sectors that account for the bulk of minimum-tax bonds, housing sales dropped more than $3 billion and transportation financing fell $700 million, while environmental issuance rose nearly $700 million.
Negotiated sales continued to account for the bulk of tax-exempt financing, rising 33%, to $179.58 billion. Competitive sales rose 16%, to $40.54 billion, while private placements fell 27%, to $1.56 billion.
Similarly, revenue bonds made up more than two-thirds of the market, rising 36% to $150.35 billion, while general obligation issues increased 16%, to $71.33 billion.
Bond insurance easily dominated the market for credit enhancements, rising 44% over the first nine months, to $83.93 billion, or 37.8% of all municipal bonds. Both the dollar amount and market share are record highs for bond insurance. Bank letters of credit rose 38%, to $8.7 billion, spurred in part by a 15% increase in variable-rate financing, to $13.23 billion. The use of insured mortgages or collateralization by mortgage securities dropped 51%, to $2.12 billion. Surety bonds appeared in a handful of issues, totaling $87 million.
Bond sales by state and local authorities continued to soar, with state agency financings jumping 37%, to $65.94 billion, and local authority sales gaining 53%, to $43.24 billion. Cities, counties, and local districts the largest issuing group -- increased their sales 17%, to $85.85 billion. State government issuance rose 19%, to $22.62 billion, and financing by public universities and colleges increased 31%, to $4 billion.
