Northeast municipal bond issuance fell 26% in first half

Municipal bond issuance in the Northeast was 26% lower in the first half of 2023 than the same period last year, according to data supplied by Refinitiv.

Issuers in the Northeast sold $39.4 billion of debt in 590 issues in the first half of the year, down from $53.3 billion in 907 issues offered in the first half of 2022.

Northeast issuers picked up the pace in the second quarter, issuing $21.7 billion after a $17.7 billion first quarter. The year-over-year figures were down 22% in the second quarter, 30.8% in the first.

Nationally, total issuance was $174.8 billion for the first half of the year, down 20% from $218.2 billion in the same period in 2022.

“It is clear that rates have been an important factor in these patterns,” John Hallacy, founder of John Hallacy Consulting LLC, told The Bond Buyer. “The lack of refunding opportunities is also having an impact.”

Tax-exempt issuance in the region fell 20.9% in the first half to $35.1 billion from $44.4 billion in the same period last year. Taxable volume was down 40.1% to $3.2 billion. Alternative minimum tax deals plunged 70.3% to $1.1 billion in 12 issues from $3.7 billion in 20 issues in the same period last year.

Both revenue and general obligation bond issuance dropped in the first half, with $24 billion of revenue bonds sold, down 32.6% from last year, and $15.3 billion of GOs sold, down 13.3%.

“GOs fared better than revenue bonds with decreases of 13.3% and 32.6%, respectively,” Hallacy said. “Some of the larger infrastructure projects that are funded in part from the various federal programs have yet to commence in a big way. Most of those projects are revenue based.”

New money volume was down even more than refundings off 30.4% to $31.7 billion, down from $45.5 billion; refundings dropped 25.2% to $5.1 billion in 24 issues, off from $6.8 billion in 108 issues.

On a state-by-state level, New York issuers led the pack by selling $18 billion of municipal bonds in 184 sales in the first half, although this was down 33% from the $26.9 billion in 286 deals sold in the first half of 2022.

The drop may reflect a return to baseline after the exceptionally prolific year New York issuers displayed in 2022, when the state led the entire country in municipal bond issuance, ahead of the usual suspects in California and Texas.

Texas and California were well ahead of New York in the first half.

New York City sold the largest deal in the region on June 1 when Jefferies and Siebert Williams Shank priced $1.6 billion of taxable and tax-exempt general obligation bonds.

This was followed by the number two transaction — a $1.3 billion revenue bond sale priced on March 9 by Goldman Sachs and BofA Securities for the New York City Municipal Water Finance Authority, and number three, a $1.3 billion deal for New York’s Triborough Bridge and Tunnel Authority priced by BofA on March 10.

Massachusetts had the largest deal outside New York with the region’s fourth-largest, $1.2 billion of new money and refunding bonds priced by J.P. Morgan Securities on June 28.

“New York City issuers had strong representation in the top transactions with over half of the activity,” Hallacy said. “New York State, Massachusetts, District of Columbia, and New Jersey rounded out the list.”

New York held the top five places on the list of the Northeast’s top issuers, led by the Triborough Bridge and Tunnel Authority with $3.45 billion, narrowly ahead of New York City’s $3.44 billion. Massachusetts broke into the list at sixth place with the $1.2 billion from its June GO sale.

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Only three states had increases in volume from their issuers in the first half.

New Jersey was at $4.5 billion, up 45.1%; Delaware was up 43.2% to $419.8 million, and Vermont issuers sold $132.5 million.

“Delaware and Vermont are cautious with their issuance, but keep a steady pace year to year,” Hallacy noted. “The largest volume declines were in Connecticut, Maine, New Hampshire, New York and Rhode Island.”

Massachusetts was the number two source of municipal bonds in the Northeast at $4.7 billion, down 5.4% year-over-year.

Maryland had the biggest fall among states with issuers that sell a significant amount of bonds, down 40.9% to $2.4 billion, followed by Connecticut with a 40.2% drop to $1.7 billion.

Issuance declined in almost all sectors.

Issues Refinitiv classes as being for education issues fell 28% to $6.9 billion; general purpose bonds dropped 20.4% to $14.9 billion; and transportation bonds fell 10% to $7.6 billion.

 
State governments were the only category of issuers to increase their deals with a modest 0.3% increase in volume, Hallacy pointed out, as supply for other entities such as state agencies, counties and parishes, cities and towns, colleges and universities, co-operative utilities and tribal governments all declined.

The top bookrunner in the Northeast were BofA Securities, credited by Refinitiv with underwriting $7.1 billion. It was followed by RBC Capital Markets with $4.6 billion, Jefferies with $4 billion, Barclays Capital with $3.5 billion and Morgan Stanley with $3.2 billion

“Bank of America was out well ahead of competitors in the Northeast,” Hallacy said. “RBC and Jefferies were the runners up.”

In the Northeast, the top five law firms were Norton Rose Fulbright, credited by Refinitiv with $3.9 billion, followed by Bryant Rabbino, Orrick Herrington & Sutcliffe, M. Jeremy Ostow Esq. and Mintz Levin Cohn Ferris Glovsky & Popeo.

Public Resources Advisory Group was the number one financial advisor in the Northeast, credited by Refinitiv with $7.1 billion of business followed by Acacia Financial Group with $4.8 billion, Frasca & Associates with $4.2 billion, PFM Financial Advisors with $2.6 billion and Phoenix Advisors with $1.7 billion.

In the Northeast, bond insurance hit $2.7 billion in 81 deals in the first half, down 51.6% from the $5.6 billion in 182 deals done in the first half of last year.