The recent increase in issuance of municipal bonds in March marks a noticeable trend over the past three months. This rise in volume is attributed to a surge in refundings and several billion-plus dollar deals. The issuance jumped by 7.1% to $36.405 billion in 532 issues, up from $34.008 billion in 601 issues in 2023. The surge in issuance was supported by increased demand and a more favorable economic environment, which boosted issuer confidence. Notably, issuance in March surpassed the $34.579 billion 10-year average, indicating a robust market performance.
Several factors contributed to the uptick in supply during this period. Firstly, there was a heightened demand for municipal bonds, with issuers feeling more confident to enter the market following increased inflows into muni mutual funds. Moreover, the economy was reported to be performing well, with more tailwinds than headwinds, which further bolstered issuer confidence to take on additional debt. Additionally, large billion-plus dollar deals like those from California, New York City, and Washington played a significant role in boosting the overall supply.
Tax-exempt issuance saw a significant increase of 41.3% in March, totaling $33.917 billion in 472 issues compared to $24.002 billion in 539 issues in 2023. On the other hand, taxable issuance decreased by 78% to $1.993 billion in 55 issues from $9.060 billion in 57 issues a year ago. The rise in tax-exempt issuance can be attributed to the favorable market conditions and increased demand from investors during this period.
Looking ahead, it is expected that issuance will remain front-loaded this year as issuers rush to access the market before the November election. The surge in issuance will likely continue for the next seven months as issuers seek to take advantage of the current favorable borrowing environment. However, the pace of issuance calls may slow down as municipal issuers await the outcome of investor actions and market developments.
In terms of regional trends, New York claimed the top spot in issuance year-to-date with $14.975 billion, representing a substantial increase of 53.6% year-over-year. California followed closely behind with $14.934 billion, marking a 32.1% increase. Texas, Massachusetts, and Alabama rounded out the top five states in terms of municipal bond issuance, each showing significant growth compared to the previous year.
The recent increase in municipal bond issuance in March reflects a positive trend in the market driven by increased demand, favorable economic conditions, and issuer confidence. The surge in issuance is expected to continue in the coming months as issuers capitalize on the current borrowing environment. Despite potential challenges and uncertainties, the outlook for municipal bond issuance remains promising for the rest of the year.