Municipal bond issuers tore through the first half of 1992 at a breathtaking pace, refunding old debt in unprecedented amounts and easily toppling market volume records.

At $108.0 billion, total issuance for the first six month of the year soared 47% above the record set just last year, when $74.2 billion of municipal bonds came to market between January and June, according to Securities Data Co./Bond Buyer.

Big drops in interest rates are driving much of the growth. Refundings to dump high-interest coupons accounted for $46.5 billion of the total, a 143% increase over the $1.91 billion sold in the first half of 1991.

First-half refundings for 1992 have already beaten the figure for all of last year, when issuers took a full 12 months to sell just $46.1 billion.

The previous first-half record for refundings was in 1987, when $33 billion came to market.

Growth in the new-money category was somewhat less dramatic, but still registered impressive gains. Volume there jumped 13%, to $62.5 billion from $55.1 billion.

If the current pace keeps up for the rest of the year, municipal volume will surpass the $207 billion record set in 1985, when issuers facing tax reform restrictions raced to market with huge deals to beat a 1986 deadline.

"If interest rates stay where they are, I think we have a chance to break" the record, said Michael D. McCarthy, a general partner at Goldman, Sachs & Co. "If rates stall out or go back up, I think we'll fall short, but not by much."

Goldman continued its underwriting dominance in the municipal market during the first half, lead managing 170 issues worth $15.2 billion between January and June, or 14% of the total. The firm's closest rival, Merrill Lynch Capital Markets, held the top syndicate spot on 220 issues totaling $9.6 billion.

Goldman topped the list in both the negotiated rankings, where it lead managed almost $11.5 billion, and in competitive deals, where it accounted for $3.6 billion. The firm was also the top lead manager of both revenue and general obligation deals, underwriting $8.8 billion and $6.3 billion, respectively.

The market's top-ranked firm also handled the biggest deal of the half, a $1.4 billion California GO issue sold in February. Bear, Stearns & Co. gets credit for the largest note sale, a $2.3 billion New York State deal.

Rounding out the top five underwriting slots were Lehman Brothers, in third place with $8.8 billion; First Boston Corp., at $7.6 billion; and Smith Barney, Harris Upham & Co., at $7.5 billion.

Among the more dramatic shakeups on the ranking lists is Bank of America, which ranked 11th for all of 1991, but slipped to 31st in the rankings so far this year.

A.G. Edwards & Sons, meanwhile, continued its steady climb up the list, ranking 14th for the first six months of 1992 after breaking into the top 20 list for 1991 at number 20. The firm ranked 25th in 1990.

Education was again the largest sector, accounting for $19.6 billion of the total compared to $14 billion during the first six months of 1991. The second biggest category, transportation, scored the largest percentage increase, jumping 89% to $11.8 billion for the first half of the year from $6.3 billion during the same period in 1991.

Growth in the negotiated sector outpaced increases in competitive activity, showing a 57% jump to $84.7 billion from $53.9 billion last year. Competitive deals rose 20%, to $24.3 billion from $20.3 billion.

Taxable municipal bond deals showed sizable gains but remain a tiny fraction of the overall market, despite predictions in the late 1980s that the category would grow as a result of federal tax reform. For the first half of 1992, issuers sold $2.1 billion of taxables, up 35% from the $1.6 billion sold during the same period last year.

Securities Data's new issue figures and underwriter rankings are based on long-term issues maturing in 13 months or longer. Private placements, remarketings, and taxable debt issues by private non-profit organizations are excluded, but municipal forwards are included.

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