Sales of new municipal bonds continued to tumble in October, dropping 54% to $10.63 billion from $23.25 billion a year ago, according to figures compiled from Securities Data Co.'s database.
October's issuance brought the year's new-issue volume to $137.76 billion, down 44% from the record $246.72 billion sold from January through October of 1993 and the lowest total for the first 10 months since 1991, when $134.57 billion was sold. However, this year's total is still the third-largest January-October volume on record, surpassed only by last year's record and 1992's $195.37 billion.
October's volume was the smallest for that month since 1990, when $8.26 billion was sold. Los Angeles County accounted for nearly 20% of the total with the sale of $1.97 billion sale of taxable general obligation bonds on Oct. 13. No other offering exceeded $275 million. Only 529 long-term bond issues were marketed last month, the fewest number for any month since January 1989.
This year's decline in new-issue volume continued to be led by refundings, which dropped 73% to $34.61 billion from $128.45 billion a year ago, and a 75% decrease in issues combining new-money and refunding bonds, to $9.51 billion from $38 billion. The declines were even more pronounced in October: refunding issues plunged 92%, to $920 million from $11.72 billion a year ago, and combined issues plummeted 93%, to $266 million from $3.62 billion.
New-money financing continued to top last year's levels, increasing 19% in October to $9.45 billion from $7.92 billion in October 1993. For the first 10 months of 1994, new-money issuance rose 17%, to $93.64 billion from $80.25 billion. Most of the increase in new-money financing has come in four sectors -- education, general purpose, housing, and public facilities.
"Government budgets are in better shape, so they're filling some of their unmet needs," said George Friedlander, fixed-income strategist at Smith Barney Inc. "They've got a little more budgetary breathing space than they did in 1993." The same applies to education and public facilities, he said.
State housing agencies have sold more new-money bonds this year, Friedlander said, because the unusually low rates available in the conventional mortgage markets last year have dried up and borrowers have gone back to the state agencies.
Overall, however, bond sales dropped for all specific purposes in October, with the declines ranging from 23% for housing to 86% for health care and public facilities. For the year to date, only housing and industrial development show increases from 1993's levels; housing has risen 10%, to $12.54 billion, while industrial development is up 9%, to $5.76 billion.
The increase in housing bonds has led to a 29% increase in new issues subject to the alternative minimum tax for individuals, to $13.57 billion for the first 10 months, and a 22% increase in the use of collateralized mortgages or federal mortgage securities to enhance new issues, to $3.44 billion.
The $1.97 billion Los Angeles County sale, the second largest municipal bond sale ever, brought the year's taxable municipal volume virtually even with last year's levels: $7.47 billion this year and $7.5 billion a year ago. The Los Angeles issue accounts for more than a quarter of 1994's taxable volume.
The use of bond insurance to enhance new issues continued to dwindle in tandem with overall volume, dropping 45% in the first 10 months of the year to $50.77 billion from $91.68 billion a year ago. The use of bank letters of credit declined 41%, to $4.5 billion from $7.57 billion.
Bonds sold through competitive bidding dropped only 6% in the first 10 months of 1994, to $43.95 billion from $46.79 billion, while the number of competitively bid issues rose, to 3,791 from 3,254 a year ago.
California issuers remained the busiest in the nation, selling $23.27 billion of bonds in the first 10 months of 1994, despite a 27% decline from their $31.65 billion figure the year before. They were followed by New York, down 35% to $14.59 billion; Texas, down 37% to $9.11 billion; Pennsylvania, down 46% to $7.08 billion; and Florida, down 57% to $6.85 billion.
Securities Data's long-term bond figures are based on issues with final maturities of 13 months or longer. Private placements and municipal forward sales are included, but remarketings and taxable debt issued directly by private nonprofit organizations are excluded. The figures are preliminary and subject to revision; for example, September's volume has been revised upward by $620 million, or 8%, to $8.31 billion from the $7.69 billion originally reported on Sept. 4.
