October supply tops $55B, highest monthly total in 2024

October saw issuance eclipse $55 billion led by new-money tax-exempt paper as infrastructure spending needs, election-related concerns and Fed policymaking uncertainty led issuers to tap the capital markets.

October's volume was at $56.63 billion in 985 issues, up 44.3% from $39.235 billion in 767 issues in 2023, according to LSEG data. October's total is above the 10-year average of $40.288 billion and is the highest monthly total this year.

Issuance year-to-date is at $441.738 billion, up 37.8% year-over-year. The market needs about $45 billion of issuance in November and December to break 2020's $484.601 billion.

The month of October is always a heavy month for issuance. During the last two election cycles, issuance was at $53.447 billion in 2016 and $73.448 billion in 2020, the highest monthly total for their respective years.

And even if 2024 were not an election year, market participants would come to market ahead of the holidays as they want their deals to garner as much attention as possible and not miss potential buyers, said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.

Many issuers were able to "kick the can" on issuing new debt over the past several years due to federal stimulus money, but now they have "burnt through it all," said Nick Venditti, head of Municipal Fixed Income at Allspring.

This has led issuers to tap the capital market to finance new projects, he said.

The election played a role as well, as issuers have flocked to the muni market en masse over the past several months to avoid any election-related market volatility, Kozlik said.

"There could have been a lot of folks who were trying to get issuance done in the month of October" ahead of Tuesday, he said.

Additionally, issuers came to market in October as they planned their deals around Fed rate cuts, Venditti said.

This has led issuers to either come to market ahead of time or push deals off until after the Federal Open Market Committee meeting, Kozlik said.

And with the 10-year UST at 4.301% at the close of Wednesday, that's a "great time to enter the market" relative to last year when the 10-year UST was near 5%, he said.

"So you've seen the market inundated with new supply, either because issuers had to or because issuers were planning around a better interest rate environment," he said.

However, recent market volatility has led some issuers to realize now is not as "attractive" as an entry point as previously thought to issue new debt.

The Ohio Water Development Authority and the California Community Choice Financing Authority both pulled their deals last week, though the latter priced on Friday.

This, though, did not have a marginal effect on October's volume figure, as each week boasted issuance near or above $10 billion.

Issuance will drop in November and December, as this week was the final week of "elevated" tax-exempt supply through at least mid-November, according to J.P. Morgan strategists led by Peter DeGroot.

However, the heavy monthly market trends will return in 2025, many market participants say. Venditti expects 2025 to be a big supply year as there are still issuers with capital market needs that have remained on the sidelines.

A $500 billion-plus annual figure has been bandied about and Ramirez is already projecting that supply for 2025 will come in at $515 billion, a 5% increase from the firm's 2024 estimated total of $490 billion. MMA expects issuance in 2024 to be at $500 billion, similar to its projected 2024 total.

October issuance details
Tax-exempt issuance in October was at $49.055 billion in 899 issues, a 54.5% increase from $31.745 billion in 683 issues a year ago. Taxable issuance rose 17.9% to $4.735 billion in 77 issues from $4.016 billion in 69 issues in 2023.

New-money and refunding volumes both increased. The former rose 37.8% to $41.999 billion from $30.486 billion, while the latter increased 31.9% to $7.621 billion from $5.78 billion.

Revenue bond issuance increased 38.5% to $35.443 billion from $25.591 billion in October 2023, and general obligation bond sales rose 55.3% to $21.187 billion from $13.644 billion in 2023.

Negotiated deal volume was up 56.2% to $44.027 billion from $28.195 billion a year prior. Competitive sales increased 25.5% to $12.462 billion from $9.931 billion in 2023.

Bond insurance rose 49.7% to $5.811 billion from $3.881 billion.

Bank-qualified issuance rose 16.1% to $936.2 million in 233 deals from $806.2 million in 194 deals a year prior.

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

Issuers in California accounted for $63.958 billion, up 34.7% year-over-year. Texas was second with $60.115 billion, up 12.8%. New York was third with $53.03 billion, up 51.7%, followed by Florida in fourth with $24.681 billion, up 116.7%, and Illinois in fifth with $13.964 billion, a 25.2% increase from 2023.

Rounding out the top 10: Pennsylvania with $13.262 billion, up 54.4%; Massachusetts with $12.829 billion, up 72.9%; Washington with $11.019 billion, up 36.7%; New Jersey with $10.494 billion, up 82%; and Wisconsin with $9.582 billion, up 35%.