| SAN FRANCISCO
SAN FRANCISCO Dec 30 U.S. municipal bond and
note issuance reached a six-year high in 2016, closing the year
with $423.8 billion in new sales and up 12 percent from 2015,
according to Thomson Reuters data.
The last time the annual issuance was larger than 2016's
total was in 2010, when $430.4 billion of new bond and notes
were sold on the municipal market. In 2015, issuance totaled
Sales surged this year as low interest rates kept issuers
returning to the $3.7 trillion U.S. municipal bond market and
yield-chasing investors gobbled up deals.
Low and negative sovereign interest rates have contributed
to a scramble for relatively higher-yielding U.S. municipal
debt. Foreign buyers now hold more muni bonds than ever, U.S.
Federal Reserve data shows.
This year was notable for the steady grinding down of both
rates and credit spreads, Janney Fixed Income Strategy reported
on Friday. Rates hit a low in July with the 10-year benchmark
bottoming out at 1.34 percent and the 30-year benchmark at 2.11
percent. Rates have increased since then, with the 10-year
rising by 104 bps and the 30-year improving by 106 bps,
especially after November's election.
"The movement of rates during 2016 has been interesting to
watch," Janney reported. Year-over-year, the 10-year increased
by only 32 bps from 2.06 percent in January 2016. The 30-year
increased by 28 bps from 2.89 percent.
New sales of municipal bonds slumped during the month of
December, totaling just $18.3 billion, the slowest month of 2016
and about half of the year's monthly average of $35.3 billion.
The first week of 2017 will start sluggish with $3.01
billion of new deals expected from state, city and other
government agencies, according to preliminary Thomson Reuters
data. Deals will be comprised of $2.2 billion from the
negotiated calendar and $80 million from the competitive
The largest deals to start out 2017 hail from state higher
education systems. Texas State University System Board of
Regents plans to sell $604.6 million of revenue and refunding
bonds. Another $380 million will be sold by the Board of Regents
of the University of North Texas System. The University of
Pittsburgh of the Commonwealth System of Higher Education plans
to sell $525 million of taxable university refunding bonds.
(Reporting by Robin Respaut; Editing by Dan Grebler)