The decline in monthly municipal bond volume accelerated in August, with new issues plunging 56%, to $11.29 billion from $25.51 billion in August 1993, according to figures obtained from Securities Data Co. 's data base.
Through the first eight months of 1994, municipal bond volume is down 42%, to $116.71 billion from $199.41 billion in the year-ago period.
With the bulk of the large refundings done in 1993 and the market mired in uncertainty over interest rates, there have been few bright spots in 1994.
"The trend in total volume is not getting any better," said George Friedlander, managing director of fixed-income portfolio strategy with Smith Barney Inc. "Over the last four months we're down 50%." Friedlander said he doesn't see any improvement over the remainder of the year without a drop in rates.
"Volume is heading down," agreed Robert W. Chamberlin, senior vice president and supervisory municipal analyst at Dean Witter Reynolds Inc. "There is a consistent pattern of lower overall volume. Over the next four months, overall volume will recede even further."
In the month-by-month comparisons to the 1993 counterparts, the decline in 1994 has been consistently over 40%, with last month's 56% drop the highest so far.
Further, the number of issues sold each month has been falling for the past three months, from 978 in June to 641 in August, the lowest monthly total since January 1991, when only 609 issues were brought to market.
"What's dragging us down is [the decline in] refundings," Friedlander said. "New money is all you could expect of it."
Through August, refundings are down 70% to $31.31 billion from 1993 's record-setting pace of $103.65 billion. Combined new-money and refunding issues plummeted 73%, to $8.66 billion from $32.43 billion in the 1993 period.
The drop in August was even more dramatic, with refundings reaching only $1.12 billion, off 92%, and combined issues at a paltry $238 million, a decline of 93% from August 1993.
On the other hand, "new-money growth is impressive," Chamberlin said. "And the size of new-money issues is getting bigger. That is clearly quite positive."
New-money deals are up 21% in the first eight months, to $76.74 billion from the 1993 period's $63.33 billion. Last month new-money issuance increased 19%, to $9.93 billion from $8.32 billion.
The size of the average new-money deal through August was $18.67 million compared with $13.19 million a year ago.
"That's where the market appears to be headed through 1994," Chamberlin said. "And quite possibly into 1995."
The only bright spots among the specific-use areas are in housing and industrial development. In the first eight months, housing bond volume jumped 29%, to $10.09 billion from $7.79 billion. Industrial development issuance increased 16%, to $5.02 billion from $4.31 billion.
In August, housing deals soared 72%, to $1.64 billion from $953 million last August. That includes a $100 million issue sold by the Tennessee Housing Development Agency on Aug. 3.
Industrial development deals were up 40% from August 1993, to $556 million from $398 million. On Aug. 5, South Orange County (Calif.) Public Finance Authority sold a $239 million economic development deal.
"However, those areas are working against a stacked deck," Chamberlin said. "The Budget Reconciliation Act of 1993 allowed those agencies to get rid of their limitations. There's no great strength in that."
Both housing and industrial development issuance began rising in September 1993.
"The housing volume and a small amount of the industrial increase has also had an effect on" alternative minimum tax issuance, Friedlander noted. "Which in turn has caused a widening in the AMT spreads by 10 to 25 basis points."
AMT volume is up 40% through August, to $10.68 billion from $7.31 billion in the year-ago period. Last month, AMTs increased 36%, to $1.87 billion from $1.38 billion.
A $700 million California general obligation deal was the largest in August, followed by a $470 million Harris County Health Facilities Development Corp., Tex., issue. The third largest was a $375 million New York State Thruway Authority deal.
California issuers remained the busiest this year, bringing $19.23 billion to market, a 27% decline from $26,35 billion in the year-ago period. Issuers in New York State were the next most active, selling $13.27 billion in the municipal market, off 28% from $18.39 billion. They are followed by: Texas, which sold $7.74 billion, off 35% from $11.95 billion; Pennsylvania, at $6.36 billion, down 43% from $11.15 billion; and Florida, with $6.27 billion, a decrease of 52% from $12.93 billion.
Securities Data is constantly updating its data base. Therefore, these figures are preliminary and subject to substantial revision. For instance, July bond volume was revised to $13.39 billion, an increase of $1.35 billion from the total initially reported on Aug. 1.