Municipal Bond Sales Poised to Decline as Redemptions Increase

Municipal bond sales in the U.S. are set to decrease in the next month while the amount of redemptions and maturing debt rises.

States and localities plan to sell $12.1 billion of bonds over the next 30 days, according to data compiled by Bloomberg. A week ago, the calendar showed $13.6 billion planned for the coming month. Supply figures exclude derivatives and variable-rate debt. Some municipalities set their deals less than a month before borrowing.

Texas Transportation Commission plans to sell $1.75 billion of bonds, Washington state has scheduled $942 million, Louisiana will offer $584 million of gas and fuel revenue securities and Alabama Federal Aid Highway Finance Authority will bring $508 million to market.

Municipalities have announced $15.3 billion of redemptions and an additional $12.1 billion of debt matures in the next 30 days, compared with the $19.8 billion total that was scheduled a week ago.

Texas Debt

Issuers from Texas have the most debt coming due with $3.16 billion, followed by New York at $1.34 billion and Minnesota with $1.09 billion. New York State Dormitory Authority has the biggest amount of securities maturing, with $394 million.

The $3.5 trillion municipal market contracted by $4.71 billion last month. Sales of $46.1 billion compared with redemptions and maturing debt that totaled $50.8 billion. Last year, the market shrank by 4 percent. This year, maturities are poised to drop 38 percent to $176 billion from the 2014 levels.

Investors added $1.34 billion to mutual funds that target municipal securities in the week ended Jan. 7, compared with $1.4 billion in the previous period and the one-year average of $561 million, according to Investment Company Institute data compiled by Bloomberg.

State and local debt maturing in 10 years now yields 99.2 percent of Treasuries, Bloomberg data show. Since 2000, the gap has averaged 93.7 percent.

California Yields

Bonds of Michigan and California had the best performance over the past year compared with the average yield of AAA rated 10-year securities, the data show. Yields on Michigan’s securities narrowed 18 basis points to 2.08 percent while California’s declined 15 basis points to 2.00 percent.

Puerto Rico and New Jersey handed investors the worst results. The yield gap on Puerto Rico bonds widened 50 basis points to 9.19 percent and New Jersey’s rose 10 basis points to 2.36 percent.

Before it's here, it's on the Bloomberg Terminal.