According to The Bond Buyer, monthly municipal volumes declined in July; data from Refinitiv shows issuance was down 10.3% year-over-year.
Portfolio Manager Wesly Pate of Income Research + Management said as a new fiscal year begins, the lack of increased issuance in June is a good tell for what the market will see in the second half of the year.
“That being said, I don’t think we will see a month going forward with greater than $30 billion in volume. Supply and demand drive where the market is heading,” Pate said. “Volume has been, and will continue to be, the status quo with a lack of increase in supply and no near-term volatility.”
The Bond Buyer also highlighted that refunding volume for the month fell 22.6%, compared to July 2018.
“New money accounts for 75% of issuance; infrastructure needs will be what drives incremental issuance going forward,” Pate said. “We haven’t seen an uptick in ballot approval for bonds, so yearly volume will stay in the $325-$340 range.”
While issuance isn’t expected to start soaring, there is potential to get some more volume in the market going forward, according to Pate.
“Build America Bonds are an area where you could see an uptick in refunding – over the next 12-24 months, there could be as much as $15-20 billion of additional volume.”