Bloomberg News

U.S. Muni Sales May Rise to $310 Billion, Friedlander Says

November 09, 2011

(Updates with survey results in fourth paragraph. For more news from the Bloomberg State and Municipal Finance conference, see EXT2 <GO>).

Nov. 2 (Bloomberg) -- U.S. municipal-debt issuance may rebound to $310 billion in 2012 from a projected $270 billion this year as borrowers seek to refinance, said George Friedlander, senior municipal-bond strategist at Citigroup Inc.

The pace of sales has quickened in the past month, with issuers selling $31.8 billion of municipal debt in October, the most since December, according to data compiled by Bloomberg. Issuance is still on a pace to fall short of the $408 billion offered last year, Bloomberg data show.

“I see issuance staying solid right through the middle of December,” Friedlander said at the State and Municipal Finance conference hosted by Bloomberg Link in New York.

Issuance, which came to about $204 billion for this year through October, may be in the range of $251 billion to $275.9 billion next year, according to 41 percent of 118 conference attendees responding to a snap survey today. The second-biggest portion, 34 percent, expects borrowing of $276 billion to $300 billion.

2012 Outlook

There may be an increase next year because more borrowers will be able to refinance debt issued a decade ago with a restriction that it not be replaced for 10 years, said Friedlander.

Bond sales slowed from last year partly due to a backlash against government spending and turnover in governors’ offices and state Legislatures in the November 2010 elections, he said.

Some borrowers also sought to sell before the Dec. 31, 2010, expiration of the Build America Bonds program, through which municipalities issued taxable municipal debt for infrastructure. The program gave issuers a federal subsidy on interest costs.

“The need is still there” for state and local infrastructure financing, said Kathleen Evers, head of municipal credit analytics at BMO Capital Markets Corp. in New York, who also spoke at the conference. “The conservatism is going to position governments to be back in the market.”

--Editors: Mark Tannenbaum, Stephen Merelman

To contact the reporters on this story: John McCorry in New York at jmccorry@bloomberg.net; Michael McDonald in Boston at mmcdonald10@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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