Refundings fueled a 43% increase in new-issue bond volume in the first nine months of 1992, driving new deals to $171.07 billion from $119.73 billion in the same period a year ago, according to figures compiled by Securities Data Co.
With interest rates reaching their lowest levels in more than a decade, issuers found the time ripe to bring refunding deals to market. Refundings sky-rocketed to $81.91 billion through September, up 147% from $33.11 billion a year ago and already the largest total ever for a calendar year. Refundings accounted for 48% of total issuance, compared with 28% in 1991.
"There's nothing surprising in that." said George Friedlander, head of municipal research with Smith Barney, Harris Upham & Co. "Interest rates have come down a lot ... We're 10 years from the peak in rates."
In 1982, The Bond Buyer's municipal bond indexes all hit record highs, with the 20-bond index of general obligation bonds reaching 13.44%, the 11-bond index 13.0%, and the revenue bond index 14.32%.
"Even those who were not able to do advanced refundings were able to take advantage of the rates with current refundings," Friedlander said.
New money, on the other hand, has risen only 3% over the level in the same period a year ago to $89.15 billion from 86.63 billion.
Friedlander noted that despite an increasing need for states and localities invest in their infrastructures, "their ability to do so does not keep pace. "
"There are debt capacity restraints, "Friedlander continued, "including volume caps for housing and student loans, state and locals who would love to invest in infrastructures, but don't have the debt capacity and an electorate that's just saying no."
Sales of municipal notes, which mature in 12 months or less, has fallen 5% this year, to $37.07 billion from $38.98 billion in the first nine months of 1991. But the short-term market surged in September, with a record $l2.7 billion of sales.
The $208.14 billion of notes and bonds sold this year is a 31% increase from the $158.71 billion brought to market in the same period a year ago. The market needs to exceed only 1991's total of $216.39 billion and 1985's record of $228.8 billion to make 1992 its biggest year ever.
Bond financing has risen this year for almost every purpose category. General-purpose and multipurpose issues, the largest category, posted a 43% rise through September, to $45.6 billion from $31.79 billion.
Education, the largest specific purpose, jumped 46% through the first three quarters, to $29.78 billion from $20.35 billion a year ago. That amount eclipsed the previous 12-month high of $27.3 billion, set in 1991.
Transportation bond sales soared to an annual record of $20.63 billion, up 115% from $9.59 billion a year ago. Bonds for roads and highways exploded 153%, to $9.85 billion from $3.89 billion, and airport financing climbed 140%, to $5.29 billion from $2.2 billion. (See related story on page 4A.)
Utilities financing rose 46%, to $18.95 billion from $13.01 billion, only $100 million below its all-time high of $19.05 billion, set in 1991. Health-care volume rose 16%, to $16.21 billion; housing was up 22%, to $11.69 billion; electric power jumped 74%, to $11.5 billion; industrial development increased 32%, to $5.71 billion; and environmental facilities rose 18%, to $5.48 billion.
Public facilities was the only sector to decline in the first nine months of 1992, falling 4%, to $5.52 billion from $5.75 billion. Most of the drop came in the correctional facilities sector, which fell 29%, to $1.33 billion from $1.87 billion.
Note sales declined for most specific purposes, although the general-purpose category, the largest overall, showed a 4% increase, to $31.21 billion from $29.99 billion. The only specific purpose to post an increase was the small health-care sector, which more than doubled to $31 million from $14 million. Notes for education, the dominant specific purpose, dropped 24%, to $4.29 billion from $5.66 billion a year earlier.
General obligation issues surged to a record $62.43 billion, up 52% from $41.05 billion last year, and increased their share of the overall market slightly, to 36% from 34%. Revenue bond sales were up a hefty 38%, to $108.64 billion from $78.68 billion.
California issuers continued to be the most active in the long-term bond market, offering $18.91 billion for sale, up 3% from $18.32 billion the year before. New York was second, with a 16% increase to $15.79 billion. Combined, the top two states accounted for 20% of the overall volume, a sharp decline from their 27% share in the same period a year ago.
They were followed by Texas, up 59%, to $13.18 billion; Florida, up 54%, to $10.41 billion; and Pennsylvania, up 30%, to $9.08 billion. Texas' and Florida's totals already are the second-highest ever for those states, surpassed only by their 1985 records of $21.51 billion and $13.5 billion, respectively.
Securities Data's figures are preliminary and subject to substantial revision. The preliminary new-issue volume for September published on Oct. 1, for example, has been revised upward by $1.06 billion, to $18.19 billion from the initially reported $17.13 billion.