State and local governments sold $11.57 billion of long-term bonds in October -- making this the third-biggest year on record for the municipal market, with two months yet to go.
Municipal bond sales for 1991 now total $131.85 billion through Oct. 31, which was 28% above the $103.38 billion sold in the same period of 1990 and, in fact, already surpasses the $128.59 billion total for all of last year. The market has seen only two bigger years: 1985, when volume soared to an unprecedented $204 billion, and 1986, wh n $151.3 billion was sold.
In both of those years, municipal issuers were driven by the threat of tax reform measures to sell massive amounts of bonds.
Interest rates, not tax reform, have been the market's chief spur this year. By dropping to their lowest levels since 1987, rates have spurred a 55% surge in refunding issues, to $30.89 billion from $19.95 billion a year ago, and a 21% jump in new-money financing, to $100.96 billion from $83.43 billion.
In addition, sales of short-term notes have risen 29% this year, to $39.15 billion from $30.31 billion a year ago. This year's note volume is already the second-highest ever for a full year, exceeded only by 1982, when $43.39 billion was sold. At that time, the U.S. Department of Housing and Urban Development was still marketing tax-exempt notes for housing projects and urban renewal, and it sold $26.54 billion of notes that year.
The pace of new bond and note sales did fall somewhat in October, with bonds dropping 18% and notes falling 24%, to $2.37 billion, from September's figures of $14.08 billion and $3.11 billion, respectively. But last month's bond sales were 39% ahead of those for October 1990, when $8.32 billion was marketed, and note sales were 108% higher than the $1.14 billion sold the previous October.
The number of bond issues sold this year rose 15% in the first 10 months, to 8,261 from 7,180 in the same period a year ago. the number of note issues has risen 18%, to 2,904 from 2,471.
Education was the leading specific purpose for bond financing in the first 10 months of 1991, accounting for $21.36 billion, or 16.2% of the market. That represented a 14% increase from $18.78 billion of education bonds sold in the same period last year.
Much of this year's increase in volume, however, came in the "other" category, which includes general-purpose and multipurpose issues. This category reported an increase of $11.56 billion, or 47%, to $36.37 billion from $24.81 billion a year ago.
Other purposes showed solid gains, as well. Health-care issuance rose 33%, to $14.47 billion from $10.91 billion. Utilities jumped 52%, to $13.83 billion from $9.11 billion. Transportation rose 15%, to $11.7 billion from $10.22 billion. Electric power rose 118%, to $7.34 billion from $3.37 billion. Public facilities rose 29%, to 6.11 billion from $4.76 billion. Environmental facilities gained 45%, to $5.6 billion from $3.85 billion. Industrial development increased 27%, to $4.89 billion from $3.84 billion.
Only one sector showed a decline -- housing, which fell 26%, to $10.17 billion from $13.73 billion. This is partly the result of a third-quarter surge of housing bond sales in 1990, when issuers rushed to market in July and August before the law permitting tax-exempt single-family housing bonds lapsed on Sept. 1 for more than a month.
The law was extended to Dec. 31 of this year, so a similar surge could occur this month and next if the law is not extended further.
The use of bond insurance continued to accelerate from last year's pace, with the volume of insured issues rising 54% through the first 10 months, to $40.72 billion from $26.37 billion a year ago. Insured bonds now account for 30.9% of the overall volume, up from 25.5% a year ago.
Other credit enhancements reported large declines. Issues backed by bank letters of credit dropped 47%, to $5.44 billion from $10.31 billion, in part because variable-rate financing fell 15%, to $8.3 billion from $9.81 billion. Bonds secured by insured mortgages or collateralized by mortgage securities, most of which are housing bonds, fell 39%, to $2.92 billion from $4.78 billion.
The 26% slump in housing issues, as well as a 12% decline in airport bond sales, contributed substantially to a 36% drop in bonds subject to the alternative minimum tax for individuals, to $10.21 billion from $16.02 billion.
Taxable bond sales, however, have nearly doubled, to $3.18 billion from $1.61 billion.
California issuers were by far the busiest in the first 10 months of 1991, marketing $19.82 billion of bonds, or 15% of the overall total. That represents a 48% jump from 1990, when they sold $13.42 billion in the January-October period.
California was followed by New York, up 8.7% to $14.85 billion; Texas, up 61%, to $8.59 billion; Pennsylvania, up 95%, to $7.53 billion; and Florida, up 67%, to $7.53 billion.