November issuance falls YOY, but 2024 will break records
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Issuance fell in November year-over-year, marking the first month supply has declined in 2024, as election-related uncertainty and fewer available pricing days kept volume low. Despite this, bond volume in 2024 will break issuance records.
November’s volume was at $24.743 billion in 607 issues, down 33% from $36.918 billion in 822 issues in 2023, according to LSEG data. November’s total is below the 10-year average of $32.278 billion and is the lowest monthly total this year.
Issuance year-to-date is at $474.755 billion, up 32.8% year-over-year. And with only December left this year, which has averaged $32.452 billion over the past 10 years, supply in 2024 will break 2020’s record of $484.601. This also puts issuance in 2024 on track to near, if not exceed, $500 billion.
The decrease in issuance in November stemmed in part from the lack of available pricing days, said Tom Kozlik head of public policy and municipal strategy for HilltopSecurities.
“There wasn’t much time for issuers to get into the market in November,” he said, noting if there had been fewer interruptions issuance would have been higher.
Issuers were up against the election and the Federal Open Market Committee meeting in the first week of the month while the last week saw the Thanksgiving holiday, with both weeks seeing paltry issuance figures, Chad Farrington, co-head of municipal bond investment strategy at DWS.
Sandwiched between them were two consecutive weeks of heavier supply, as deals like $1 billion of gas project revenue bonds from the Black Belt Energy Gas District and $1.1 billion of United Airlines Terminal Improvement Projects airport system special facilities AMT revenue bonds in Houston priced.
This, though, could not buoy November into seeing issuance gains year-over-year.
Election-related market volatility also played a role in the decrease in issuance, Farrington said.
The start of the third quarter saw six consecutive weeks of issuance topping $10 billion, as supply was pulled forward ahead of the election, he noted.
However, election volatility proved to be short-lived and not as much of an impact as initially thought.
The day after the election saw yields sell off before rallying to close that week. Since then, munis have not experienced major swings in either direction.
“There was a decent amount of volatility and election uncertainty before the election, and there’s still uncertainty and volatility; it’s just a different kind of uncertainty,” as election uncertainty has turned into policy uncertainty, which could continue into 2025, Kozlik said.
Additionally, the decrease in supply does not indicate declining “issuer enthusiasm,” which Kozlik expects to continue into December, expecting issuance to land between $20 billion and $30 billion.
But with the
This may be similar to 2017 when the Tax Cuts and Jobs Act eliminated tax-exempt advanced refundings, leading issuers to come to market en masse in December at a whopping $69.827 billion to get those deals through before the end of the year, he noted.
Ahead of next year, market participants have started putting out their predictions for 2025 with the most thinking issuance will be around $500 billion.
Kozlik, though, is predicting $745 billion of issuance for next year, mostly due to tax policy changes.
He believes legislation will be introduced that will eliminate or “significantly curtail” the muni bond tax exemption, that would lead to the inability to issue tax-exempts starting in 2026. This, he noted, will prompt issuers to come to market in 2025 in record amounts to issue tax-exempt bonds before the following year.
However, Matt Fabian, a partner at Municipal Market Analytics, argues that an early removal of the tax-exemption or early imposition of a potential 28% cap on the exemption’s value could lead issuance drop to $250 billion to $300 billion from the $500 billion industry consensus.
November issuance details
Tax-exempt issuance in November was at $21.094 billion in 543 issues, a 31.2% decrease from $30.648 billion in 737 issues a year ago. Taxable issuance fell 48.8% to $1.657 billion in 52 issues from $3.234 billion in 74 issues in 2023.
New-money and refunding volumes both decreased. The former fell 36.3% to $19.365 billion from $30.406 billion, while the latter decreased 6.6% to $3.613 billion from $3.868 billion.
Revenue bond issuance decreased 35% to $16.951 billion from $26.07 billion in November 2023, and general obligation bond sales fell 28.2% to $7.792 billion from $10.848 billion in 2023.
Negotiated deal volume was down 30.5% to $20.084 billion from $28.91 billion a year prior. Competitive sales decreased 27.5% to $4.54 billion from $6.262 billion in 2023.
Bond insurance fell 37.5% to $2.539 billion from $4.06 billion.
Bank-qualified issuance fell 24.8% to $815.1 million in 176 deals from $1.085 billion in 263 deals a year prior.
In the states, the Golden State claimed the top spot year-to-date.
Issuers in California accounted for $68.902 billion, up 31.1% year-over-year. Texas was second with $66.194 billion, up 16.3%. New York was third with $53.513 billion, up 37.8%, followed by Florida in fourth with $25.36 billion, up 103.8%, and Pennsylvania in fifth with $15.882 billion, a 64.8% increase from 2023.
Rounding out the top 10: Illinois with $14.398 billion, up 13.1%; Massachusetts with $13.268 billion, up 55.9%; Washington with $12.936 billion, up 41.6%; Alabama with $12.642 billion, up 72.2%; and New Jersey with $10.807 billion, up 50.9%.
