New-issue volume continued to roll downhill in May, dropping the year-to-date total by 38% from a year ago, to $72.91 billion from $118.15 billion, according to information from Securities Data Co.'s database.
The plunge accelarated during the month, as new-issue volume dropped 59%, to $11.76 billion from $28.65 billion in May 1993. After running more than $16 billion a month in January, February, and March, sales dropped sharply in April and May to between $11 billion and $12 billion.
New-money financing, which had been one of the market's few driving forces, lost some of its steam in May and failed to keep up with last year's levels. New-money issuance fell 7% in May, to $8.55 billion from $9.21 billion in May 1993.
"New money is going to be the market's emphasis from here on out," said Robert Chamberlin, senior vice president of municipal research and marketing at Dean Witter Reynolds Inc. "It is the area that has been seen as an anchor. The drop-off in May was disappointing."
For the year to date, new-money deals totaled $43.79 billion, or 61% of total issuance, up 21% from last year's January-May $36.34 billion volume and 31% market share.
Uncertainty over the direction of interest rates, which has plagued the municipal market since the Federal Reserve Board began its inflation-fighting moves in February, continued to take its toll on refunding issues. They fell 84% in May, to $2.49 billion from $15.81 billion in May 1993, and so far this year have plumeted 63%, to $23.06 billion from $62.71 billion.
"This is ~batten down the hatches' time," Chamberlin said. "While there is some element of overkill from an unsettled market, with everything dropping across the board, it's easy to see issuers are not happy about coming to market ... This is a very bad omen for likely activity in the usually placid months of June, July and August. It may sound cliche, but we may be on our way to a long, hot summer."
Only two purpose categories, housing and industrial development, showed gains through the first five months of the year. Bonds for single-family and multifamily housing projects totaled $5.67 billion, up 17% from the year-ago period. A housing bond analyst said, however, that "the reauthorization to issue mortgage revenue bonds wasn't reinstated until August 1993, so essentially you're comparing a regular month with one that didn't have the issuance." The small industrial development sector, which finance economic development, industrial projects, and office buildings, rose a modest 4%, to $2.45 billion from $2.35 billion.
Accompanying the increase in housing bond volume was an uptick in bonds subject to the alternative minimum tax for individuals and corporations. Minimum-tax volume for the year was up 14% through May, to $4.67 billion from $4.1 billion a year ago. In May, minimum-tax issuance surged 26%, to $1.28 billion from $1.02 billion.
Except for housing and industrial development, every purpose showed a substantial decline for the year. Bonds issued for education projects, the largest specific purpose, fell 20% for the year, to $14.83 billion from $18.54 billion. Utility bonds plunged 41%, to $8.99 billion from $15.26 billion a year earlier. Health care debt decreased 34%, to $7.76 billion from $11.67 billion. Transportation sales plunged 51%, to $6.29 billion from $12.76 billion.
Among issuers, only the small public university and college sector showed any growth in the first five months, with a 21% gain to $1.85 billion. Cities, counties, and local districts, the largest group, issued $29.76 billion, down 36% from $46.44 billion the previous year. State authority bond sales plunged 38%, to $21.07 billion from $34.04 billion; local authorities cut their issuance 49%, to $12.59 billion from $24.67 billion; and debt sold by state governments fell 33%, to $7.64 billion from $11.47 billion.
California issuers regained the top ranking among states in the year through May, selling $9.55 billion, which was down 36% from $14.92 billion a year ago. Issuers in New York State, which led the states during March and April, dropped to second with $8.29 billion, of 26% from $11.2 billion a year ago. Following New York were Texas, down 33% to $5.45 billion; Pennsylvania, off 18% at $4.17 billion; and Florida, down 43%, to $3.97 billion.
Securities Data's bond volume figures are preliminary and subject to substantial revision. For instance, April's bond volume figures have risen nearly $2 billion, to $11.1 billion from $9.28 billion on May 2, when they were last published in The Bond Buyer.
