Estimates on Muni Issuance in Strong Market

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<h3>James A. Klotz</h3>

James A. Klotz

While forecasts for 2022 muni issuance vary, there is consensus on one aspect of the tax-free bond market: Demand will continue apace.

In a survey of almost a dozen firms, analysts project anywhere from $420 billion to $495 billion in sales in 2022, according to Bloomberg. Bank of America, an outlier among forecasters, estimates a record $550 billion in issuance.

The estimated range falls in line with issuance in 2021.

Estimates on Muni Bond Issuance in Strong Market

The year closed strong, with issuance in December surging to $38.2 billion, compared with $34.8 billion in December 2020. For all of 2021, sales were $475.3 billion – just shy of 2020’s record $484.6 billion – a remarkable figure, analysts said, in light of the pandemic.

“It’s not as high as (2020). I know everybody wants more, and it to be higher, but this is very impressive,” said Erin Ortiz, of Janney Montgomery Scott LLC, according to The Bond Buyer.

‘Golden age’ of muni issuance?

Last year, two significant stimulus and relief packages were enacted, the American Rescue Plan and the Infrastructure Investment and Jobs Act. With the infusion of federal dollars, Tom Kozlik, a muni researcher at Hilltop Securities, sees a “golden age” of U.S. public finance.

“I say we’re entering one of the more positive landscapes for municipal bond issuance that we’ve seen for a long time, and I’ve been pretty skeptical about this,” Kozlik told MarketWatch.

“Don’t get me wrong, there is still uncertainty out there. But I think the Rescue Plan really put public finance entities in a much different place after this recent financial uncertainty compared to what we saw 10 years ago.”

Consensus on demand

Meantime, investors continue to pour into the municipal bond market (“Time to Rethink Municipal Bond Issuance?”) and want more.

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    To satisfy demand, the market would need to issue $475 billion, according to Eric Kazatsky, muni strategist for Bloomberg Intelligence.

    Among the investors we serve, we also see strong demand.

    Through careful selection and assistance from professional bond specialists, investors invariably find the municipal bonds that suit their objectives (“Finding Bonds When the Muni Supply Is Tight”).

    They are driven by the first law of tax-free bond investing: Always keep your interest clock ticking.

    James A. Klotz is the President of FMSbonds, Inc.
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    Jan 18, 2022

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