July issuance rises 21% from year-ago levels

Volume rose in July as front-loaded issuance ahead of the election, a lower rate environment and a breakneck pace of supply led to the seventh consecutive month of climbing issuance.

July's volume came in at $33.935 billion in 576 issues, up 21.2% from $28.008 billion in 620 issues in 2023. July's total is above the 10-year average of $32.246 billion.

Issuance year-to-date is at $277.586 billion, up 31.5% year-over-year.

The "blistering" pace of issuance is the highest since the financial crisis, said Sudip Mukherjee, a senior fixed-income strategist at UBS.

The summer technicals and redemption demand have offset the "huge" supply, so the market has been able to absorb the onslaught of new issuance, he said.

Issuance was helped this month by the decline in rates, leading to acceptance of coming to market, said Jeff Timlin, a managing partner at Sage Advisory.

That, he said, has "stimulated" some issuers' desire to come to market with deals they may have postponed or pushed off.

Issuance continued to be front-loaded year-to-date as issuers want to get ahead of any potential rate volatility associated with the election, Mukherjee said.

There is pent-up demand, "the pandemic has faded, and the economy has held up, so there is an incentive to ? pull forward supply," he said.

At the same time, there is also an incentive to push back supply because of expected Federal Reserve rate cuts, which, if realized would result in lower rates for issuers, Mukherjee said.

The market has already priced in a Fed rate cut in September, Timlin noted.

"The risk to people in terms of coming to market is not so much that they're missing the lower yield environment at this point, it's that the projections [may] change and the Fed rate cuts [could be] pushed off, and then rates rise," he said.

Issuance was lumpy in July, with three weeks of $10 billion issuance sandwiched between lower issuance due to the Fourth of July holiday at the start of the month and the FOMC meeting the last week.

Week after week of surging issuance has been a "surprise," said Chad Farrington, co-head of municipal bond investment strategy at DWS, noting the robust issuance is "way over" last year's level.

He added he would not be shocked if volume returns to the new norm of $10 billion issuance next week.

Supply usually drops during the summer months of June, July and August before picking up in September and October "as people come off vacation and issue bonds," Farrington said.

"However, maybe we don't get that weakness this time around because the summer has not dropped off," he said. "Usually, June and July are lighter months of issuance, but this year those months have been strong and steady. Therefore, maybe you don't get that pop in supply in September and October."

Going forward, the pace of issuance will "moderate" but still remain higher year-over-year, Mukherjee said.

July issuance details
Tax-exempt issuance in July was at $29.933 billion in 521 issues, a 24.8% increase from $23.989 billion in 554 issues a year ago. Taxable issuance fell 18.2% to $2.607 billion in 50 issues from $3.186 billion in 61 issues in 2023. Alternative-minimum tax issuance rose to $1.395 billion, up 67.4% from $833.6 million.

New-money and refunding volumes both increased. The former rose 7.3% to $24.256 billion from $22.602 billion, while the latter increased 52.2% to $5.688 billion from $3.738 billion.

Revenue bond issuance increased 46.3% to $23.166 billion from $15.839 billion in July 2023, and general obligation bond sales fell 11.5% to $10.769 billion from $12.169 billion in 2023.

Negotiated deal volume was up 21.9% to $27.308 billion from $22.398 billion a year prior. Competitive sales increased 37.8% to $6.339 billion from $4.602 billion in 2023.

Bond insurance rose 17% to $1.978 billion from $1.69 billion.

Bank-qualified issuance fell 11.1% to $529.6 million in 139 deals from $595.8 million in 175 deals a year prior.

In the states, the Golden State claimed the top spot year-to-date.

Issuers in California accounted for $41.004 billion, up 31.4% year-over-year. Texas was second with $39.684 billion, up 8.6%. New York was third with $32.572 billion, up 67.9%, followed by Florida in fourth with $13.946 billion, up 81.5%, and Massachusetts in fifth with $10.214 billion, a 114.6% increase from 2023.

Rounding out the top 10: Washington with $8.371 billion, up 38%; Alabama with $6.977 billion, up 46.7%; Wisconsin with $6.873 billion, up 29.8%; Illinois with $6.636 billion, down 20.4%; and Virginia with $6.193 billion, up 59%.