The municipal bond market set an all-time record for annual sales last month, even though issuance slowed considerably in November, according to figures compiled by Securities Data Co.
State and local governments have sold $208.46 billion of long-term bonds so far this year, up a hefty 36% from the $152.95 billion for the same 11 months last year and eclipsing the previous one-year high of $207 billion in 1985. A record 11,046 bond issues have been sold, up from 10,939 for all of last year.
This year's increase can be attributed entirely to refunding issues, which have soared to a record $101.87 billion, or 49% of the total. That represents a 122% jump from the $45.99 billion refunding figure for the first 11 months or 1991. New-money financing, on the other hand, has declined slightly this year, to $106.59 billion from $106.96 billion a year ago.
"The numbers are fantastic," said Robert Chamberlin, senior vice president of municipal research and marketing at Dean Witter Reynolds Inc. "But for the first time this year, we're looking at new-money data that's less than a year ago. The market continues to be dominated by refundings."
The market achieved its record volume even though November turned out to be the year's slowest month yet. Bond sales fell in November to $14.01 billion, the lowest total for a month since October 1991 and 27% below the $19.29 billion figure for November 1991, when the current boom in refundings began in earnest. Only 609 issues were marketed last month, the smallest number since 555 issues were gold in January 1990.
"With these numbers in November we have to ask, ~Are we now running out of steam?'" Chamberlin said. "The answer seems to be yes. For the first time this year we have a drop-off in monthly volume from a year ago. And although November  was one of the largest [in terms of municipal volume] last year, it appears there isn't going to be the conventional big drive in new-issue volume at the end of the year.
"Also, when we get to the point where refundings no longer make sense - sometime in 1993 - we'll probably see a dramatic flattening in new-issue volume. I can see parallels with volume data through the record years of 1985 and 1986, but there was a steep drop-off in 1987. I wouldn't be surprised to see a substantial drop-off in 1993."
Despite November's slowdown, this year's bond financing continued to be well ahead of last year for every purpose except one. General purpose and multi-purpose issues, the largest category, posted a 37% increase, to $55.61 billion from $40.74 billion.
Education, the biggest specific purpose, jumped 48% through November, to $36.12 billion from $24.34 billion a year ago. "The education sector volume is showing a very positive trend," a bond analyst said. "Typically, local school districts are less inclined to join the initial wave of refundings. But this year, with prices as they are, every crossroads town is entering the market."
Transportation bond sales jumped 60%, to $23.94 billion from $14.94 billion a year ago. Bonds sold for roads and highways soared 74%, to $10.58 billion from $6.09 billion. Airport financing doubled to $6.64 billion from $3.29 billion. Seaport issues rose to $1.24 billion from $278 million a year ago.
Utility bond sales climbed 37%, to $23.23 billion from $16.9 billion. Health-care volume jumped 26%, to $20.31 billion. Housing edged up 2%. to $13.26 billion. Electric power surged 90%, to $15.4 billion, boosted by a $1.16 billion issue from North Carolina Municipal Power Authority No. 1, the year's third-largest sale. Industrial development increased 22%, to $6.49 billion. And environmental facilities advanced 24%, to $6.99 billion.
The sole purpose category to show a decline from 1991 levels was public facilities, which dropped 8% to $7.12 billion from $7.78 billion a year ago.
"Public facilities is comprised of items that don't generate revenues, such as financing for government buildings, fire houses, police stations, et cetera," the bond analyst said. "While [bond financing] has been fairly well spread out, the strength has been in those areas with enterprise revenues."
Negotiated offerings surged 46%. to $164.03 billion from $112.41 billion, while competitively bid sales increased 13%, to $42.42 billion from $37.57 billion. Private placements dropped by one-third, to $2.01 billion from $2.98 billion.
Bonds subject to the alternative minimum tax posted a 16% gain, to $13.41 billion from $11.52 billion. Taxable deals were up 23%, to $4.35 billion from $3.53 billion.
General obligation issues soared 44%, to $74.36 billion from $51.53 billion last year. Revenue bond sales were up 32%, to $134.11 billion from $101.42 billion.
The use of bond insurance to enhance municipals continued to reach record levels, rising 57% to $72.17 billion from $46.02 billion. Bonds backed by bank letters of credit plunged 31%, to $6.14 billion, despite a 10% increase in variable-rate financings, to $12.76 billion. Bonds secured by insured mortgages or collateralized by mortgage securities fell 7%, to $4.18 billion.
State government issues went up 27%, to $22.67 billion, and state agency sales jumped 34%, to $57.9 billion. Bonds sold by local municipalities rose 40%, to $88.53 billion, and local authority sales posted a 39% increase, to $35.71 billion. Bonds sold by public universities and colleges rose 21%, to $3.65 billion.
California issuers remained the most active in the market bringing $24.77 billion to market, up 9% from $22.69 billion the year before. New York was second, with a 7% increase to $18.74 billion; followed by Texas, up 51% to $15.58 billion; Florida, up 45% to $11.87 billion; and Pennsylvania, up 24% to $11.11 billion.
Securities Data's figures are preliminary and subject to substantial revision. October's bond volume, for example, was revised to $22.5 billion, up $3 billion from the $19.5 billion reported in the Nov. 3 issue of The Bond Buyer.