September volume puts 2024 on pace to break issuance records

Bond volume in 2024 is on pace to break previous issuance records as September marked another high-volume month with state and local governments bringing the market larger deals led by new-money.

Issuance rose 44.5% in September year-over-year as dwindling pandemic aid and election uncertainty prompted issuers to come to market, pushing supply year-to-date just shy of 2023's full-year total, according to LSEG data.

September's volume reached $44.628 billion in 752 issues, up from $30.88 billion in 619 issues in 2023. September's total is above the 10-year average of $35.679 billion, per LSEG.

Volume year-to-date is at $380.423 billion, up 35.2% year-over-year. This figure is close to 2023's total issuance of $384.715 billion.

For supply this year to beat 2020's record high of $484.601, there would need to be more than $104.178 billion in issuance for the final three months of 2024.

September is the ninth straight month of issuance gains year-over-year and the sixth consecutive monthly figure above $40 billion "as issuers benefit from favorable financing rates and investors remain committed at current levels," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

No month in 2023 was above $40 billion amidst rate volatility and investor uncertainty, she said. The highest monthly figure last year was $39.601 billion in June.

Supply has been elevated in September, in part, due to dwindling pandemic aid, said Drew Gurley, a muni underwriter and managing director at Siebert Williams Shank.

As the COVID-era aid ends, issuers have new-money needs, prompting them to return to the muni market, he said.

Tax-exempt issuance in September was at $40.944 billion in 692 issues, a 46.6% increase from $27.923 billion in 560 issues a year ago. Taxable issuance surged 135.6% to $2.422 billion in 52 issues from $1.028 billion in 46 issues in 2023.

New-money and refunding volumes both increased. The former rose 36.7% to $31.791 billion from $23.257 billion, while the latter soared 178.7% to $7.926 billion from $2.844 billion.

The continued trend of mega deals coming to market also contributed to the rise in supply, which included $1.6 billion of GOs from Washington, D.C., $1.6 billion of state water implementation revenue fund master trust revenue bonds from the Texas Water Development Board and $1.5 billion of tax-exempt future tax-secured subordinate bonds from the New York City Transitional Finance Authority.

These mega deals show growing investor acceptance ? and demand ? for larger deals, Gurley said.

"We've seen a lot of cash in the market, and many issuers aren't afraid to issue billion-dollar deals," he said.

In the past, there have been a handful of billion-dollar deals here and there, but now it is not uncommon to see three or three mega deals in one week, most of which have been well absorbed, he said.

The past several months, including September, have seen issuers accelerate their deals to get ahead of the election cycle, Gurley said.

"A few were burned back in 2016 when the market was very volatile after [President Donald] Trump won," and many are attempting to come to market to avoid any volatility, he said.

The last two presidential election years, 2016 and 2020, saw issuance above $100 billion in October through December: $103.993 billion and $129.63 billion, respectively.

The surging supply, which has been more common over the last few months, will continue this week through at least the first half of October.

Issuance this week is at an $10.14 billion, led by $1 billion-plus Northwell Healthcare deal via the Dormitory Authority of the State of New York.

"These levels of supply are not particularly surprising as issuers pull forward deals ahead of November, consistent with prior election years," said J.P. Morgan strategists, led by Peter DeGroot. "[This] week's calendar will be facilitated by October reinvestment which, coupled with inflows, should allow the market to digest the calendar with relative ease."

Gurley said issuance may "dip" right before the election, at the end of October and the first week of November, before picking back up in the week before Thanksgiving and the first two weeks of December.

Those weeks may not be record weeks, but there will be issuers attempting to enter the market before and after the election as borrowing needs still exist, he said.

More September issuance details
Revenue bond issuance increased 41.6% to $28.784 billion from $20.329 billion in September 2023, and general obligation bond sales rose 50.2% to $15.844 billion from $10.551 billion in 2023.

Negotiated deal volume was up 43.5% to $35.582 billion from $24.788 billion a year prior. Competitive sales increased 101.1% to $8.848 billion from $4.401 billion in 2023.

Bond insurance rose 10.1% to $3.075 billion from $2.792 billion.

Bank-qualified issuance increased 14.8% to $772.7 million in 189 deals from $673.1 million in 175 deals a year prior.

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

Issuers in Texas accounted for $56.138 billion, up 12.5% year-over-year. California was second with $55.454 billion, up 36.1%. New York was third with $43.081 billion, up 50.5%, followed by Florida in fourth with $21.872 billion, up 117.8%, and Massachusetts in fifth with $12.098 billion, a 113.2% increase from 2023.

Rounding out the top 10: Illinois with $11.573 billion, up 29.9%; Washington with $10.435 billion, up 36.3%; Wisconsin with $8.52 billion, up 27.1%; Alabama with $8.383 billion, up 38.3%; and Colorado with $8.205 billion, up 85.2%.