A look at first half issuance and underwriting spreads

All this week our regional trend stories will look at issuance in the first half. Our statistics supplement is live on our website and we feature a story on the decline in underwriting spreads.

And if you missed any of our ESG Week coverage, make sure to check our ESG special section which has all the articles, the podcast and a taped version of the Leaders event.

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Throughout the first half of the year, supply has fallen below market participants' expectations, with the drop in issuance being driven by rising interest rates that have stymied refunding and taxable volumes. Continued market volatility, inflation hitting decade highs, and uncertainty over the Federal Reserve's policy decisions kept issuers on the sidelines.

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Municipal bond issuance in the Southwest shrank in the first half of 2022, while in Texas some big Wall Street banks dropped out of the top underwriter rankings in the wake of two state laws restricting access to government contracts. In the first six months, municipal bond issuers in the eight-state region sold $40.8 billion in 1,334 deals, compared to $45.4 billion in 1,627 deals during the same period in 2021, according to Refinitiv data.

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Spreads on underwriting municipal bonds dipped to below $4 per $1,000 on issues in the first half of 2022 due to heavy competition and a shrinking volume of deals — the lowest figures reported in two decades.

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The Bond Buyer’s Rising Stars program’s return for a seventh year will include the inaugural inductions into The Bond Buyer Hall of Fame at an awards ceremony at the close of The Bond Buyer’s Infrastructure event November 15. Visit our website to make nominations in either category.

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Infrastructure projects delivered as public-private partnerships have so far been protected from punishing construction cost increases because the contractors are legally on the hook for cost overruns and have been healthy enough to absorb the blows. But inflation, coupled with material and labor shortages, are prompting some contractors to exit the space, and accelerating a P3 trend of bringing in the private team before pricing is finalized, Fitch Ratings said in an August 11 commentary on the impact of inflation on P3 projects in the U.S.

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Short-end munis extended their days long selloff, continuing to play catch up to short-end U.S. Treasuries, as triple-A munis correct from recent outperformance relative to taxables. "Demand for low-duration tax-exempts has been so strong that short maturity benchmark yields are now lower than the after-tax yields for comparably rated benchmark taxable muni and corporate bonds," said CreditSights strategists Pat Luby and John Ceffalio.