April saw an increase in volume for the fourth straight month as pent-up demand, dwindling federal pandemic aid and the May Federal Open Market Committee meeting led issuers to tap the capital markets.
April's volume stood at $40.456 billion in 653 issues, up 21.2% from $33.377 billion in 666 issues in 2023. This is above the 10-year average of $34.984 billion,
The increase in volume in April continues the trend seen in the first quarter of 2024, where
Total volume so far this year is at $143.203 billion, a 26.2% increase over 2023's $113.452 billion.
Supply was helped this month by several factors.
For one, this is "greater comfort" about monetary policy despite this "higher for long" rate environment, Lipton said, which will likely be the case "unless something dramatically changes through economic and inflationary data points."
Additionally, "a lot of the municipalities that have pushed off deals" in the past few years, "so there's more pent-up demand," said Steve McLaughlin, co-head of the municipal capital markets group at S&P Global Market Intelligence.
Local infrastructure can only be delayed for so long before it becomes "compromised," Lipton said.
And with federal pandemic aid "winding down" and budget flexibility "waning," issuers have no choice but to tap the capital markets to fund projects, he said.
With the rise in issuance in 2024, McLaughlin said the market is attempting to return to normal.
"It's kind of getting back to business as usual after the 'COVID hangover,'" he said.
Tax-exempt issuance was at $32.868 billion in 581 issues, a 6.9% increase from $30.738 billion in 573 issues a year ago.
New-money and refunding volumes both rose. The former rose 38.4% to $28.781 billion from $20.791 billion, while the latter increased 46% to $7.43 billion from $5.089 billion.
Issuance was robust throughout April but surged toward the end of the month.
The final full week of April saw issuance grow upward of $13 billion, led by large deals such as $3.1 billion of revenue refunding bonds for the
This breakneck pace continued to end the month with
"The market climate is … pretty compelling and pretty enticing" for bringing sizable deals, Lipton said.
McLaughlin added: "Any time you have a large deal slated to come, it's good," he said.
Part of this surge in issuance toward the end of the month stems from issuers opting to come to market before the May Federal Open Market Committee meeting, Lipton said.
While rate cuts have been pushed off to later this year, if at all, there is "a degree of anxiety apprehension surrounding the FOMC meeting," he said.
Moreover, some of these large deals coming to market is a function of timing, McLaughlin said.
Deals can take months to put together, and when market participants planned to come to market with these deals, they believed the Fed would start cutting rates as early as March.
The possibility of rate cuts early in the year prompted them to come to market sooner rather than later due to the "better climate overall to issue," he said,
Issuance details
Revenue bond issuance increased 85.5% to $26.501 billion from $14.287 billion in April 2023, and general obligation bond sales fell 26.9% to $13.955 billion from $19.09 billion in 2023.
Negotiated deal volume was up 23.6% to $31.006 billion from $25.086 billion a year prior. Competitive sales increased 22.4% to $9.041 billion from $7.384 billion in 2023.
Bond insurance surged 119.4% to $3.908 billion from $1.781 billion.
Bank-qualified issuance fell 15.5% to $613.3 million in 151 deals from $725.4 million in 181 deals a year prior.
In the states, the Golden State claimed the top spot year-to-date.
Issuers in California accounted for $23.192 billion, up 25.8% year-over-year. New York was second with $18.158 billion, up 73.2%. Texas was third with $17.807 billion, down 3.6%, followed by Florida in fourth with $8.999 billion, up 136.6%, and Massachusetts in fifth with $5.991 billion, a 128% increase from 2023.
Rounding out the top 10: Alabama with $5.474 billion, up 90.6%; Washington with $4.73 billion, up 76%; New Jersey with $3.726 billion, up 64.9%; Wisconsin with $3.424 billion, down 9.3%; and Pennsylvania with $3.239 billion, up 25.3%.
