The Securities Industry and Financial Markets Association (SIFMA) today released its 2012 Municipal Bond Issuance Survey. Compiled from responses provided by large and regional municipal bond underwriters and dealers, the report forecasts what type of activity is expected in the taxable and tax-exempt municipal securities market in 2012.
Respondents expected total municipal issuance, both short- and long-term, to reach $402.0 billion in 2011, a significant recovery from their expectation of $342.0 billion in 2011. Additionally, excluding short-term notes, long-term issuance is also expected to recover in 2012, with a forecasted $347.0 billion total in 2012 compared with $288.0 billion in 2011.
“Despite fiscal difficulties at the state and local levels, the strong issuance forecast underscores the market’s appetite for municipal bonds,” said Leslie Norwood, managing director and associate general counsel at SIFMA. “This is still highly dependent upon a number of market-effecting factors including the current fate of the tax-exempt status in current federal fiscal debates.”
Other highlights from the survey include:
- Projected long-term tax-exempt municipal issuance to total $303.0 billion in 2012, a 20.2 percent increase from the $25.0 billion estimated for 2011;
- Projected long-term taxable municipal issuance is $35.0 billion in 2012, a 25.0 percent increase from the $28.0 billion estimate in 2011;
- Long-term alternative-minimum tax (AMT) issuance is also expected to rise in 2012, with $9.0 billion projected in 2012, an increase of 12.5 percent from $8.0 billion in 2011;
- Variable-rate demand obligation (VRDO) issuance is expected to decline even further by 16.7 percent to $10 billion in 2012 from a low of $12 billion in 2011.
Interest Rate Forecast
Survey respondents offered relatively uniform views on interest rate trends in the coming year, generally expecting little to no change in rates throughout 2012. Forecasts include:
- Two-year Treasury note to yield is expected to rise gradually from 0.25 percent in December 2011 to 0.5 percent in December 2012; and
- 10-year Treasury note to yield is also expected to rise gradually in the second half of 2012, with yields projected to climb from 2.0 percent end-December 2011 to 2.5 percent end-December 2012.
You can view a full copy of the SIFMA 2012 Municipal Bond Issuance Survey here:http://www.sifma.org/research/item.aspx?id=8589936844
Additional information about SIFMA’s activities and developments in the municipal securities market can be found at www.sifma.org/issues/?taxid=156. For individuals and investors interested in learning more about investing in the fixed-income markets, information can be found online at the SIFMA-sponsored educational websiteInvesting In Bonds at www.InvestingInBonds.com.