As utilities consider financing (and refinancing) projects, here’s a look at trends and forecasts for the municipal bond market.
What’s Being Issued
Year over year, municipal bond volume is keeping pace with 2020’s record-setting issues
| 2020 | 2021 | 2022 (forecast) |
| $484.6 billion | $475.9 billion | $470 billion |
Sources: SIFMA, Bloomberg
Comparing the first six months of 2021 to the first half of 2020:
- Long-term volume was up 10%
- Tax-exempt volume was up nearly 12%
Sectors with biggest growth:
- Public facilities 127%
- Environmental facilities 78%
- Transportation 49%
Sectors with the biggest decrease:
- Health care -28%
- Education -6%
| 2021 | 2020 | ||||
| Sector | Volume | Issues | Volume | Issues | Change |
| Utilities | 24,444.2 | 818 | 23,074.0 | 802 | 5.9% |
| Electric power | 5,817.0 | 69 | 5,612.1 | 66 | 3.7% |
Electric power sector trends from the first half of 2020 to 2021:
- Refunding volume was down 22%
- 95% increase in new-money issues
- Highest volume from local authorities, state agencies, and direct issuers
- Direct issuer volume up 196%
- Issues from cities and towns down 24%
Source: 2021 Midyear Statistics, The Bond Buyer
Investor activity
In 2021, investor demand for tax-exempt municipal bonds outpaced supply, which resulted in smaller spreads for investors.
Demand is expected to drop in 2022 if interest rates rise.
Factors Affecting 2022 Market
- Federal infrastructure funding ↗
- Reduced need to sell debt due to improved finances ↘
- Fewer ballot measures approved ↘
- Low interest rates ↗
- Low yields for investors ↘
- Issuer credit quality ↗
