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BoA’s Fischer Sees Muni Issuance Level at $330 Billion in 2014

Issuance in the $3.7 trillion U.S. municipal market will remain at $330 billion in 2014, about the same as this year, said Phil Fischer, head of municipal research at Bank of America Merrill Lynch.

Rising yields will be offset by the need for infrastructure improvements across the country, Fischer said in an outlook report released today. The interest rate on 10-year AAA munis will increase by about 0.65 percentage point from November to 3.33 percent by mid-2014, he said. While that may curb refinancing deals, the amount of bonds sold for new projects will increase 6 percent from this year, Fischer said.

Fischer’s estimate contrasts with a Securities Industry and Financial Markets Association survey of underwriters and dealers last week, which showed an expectation that long-term issuance would drop to $309.5 billion in 2014 from $312.5 billion this year. George Friedlander, chief municipal strategist at Citigroup Inc., last month said volume next year may plunge to $280 billion, the least since 2011.

States and cities have been reluctant to take on more debt after the longest recession since the 1930s. The muni market has shrunk every year since peaking at $3.77 trillion in 2010, Federal Reserve data show. Another contraction in 2014 would mean the longest such span in Fed data going back to 1945.

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