The bond market is experiencing a remarkable resurgence in 2024, with issuance levels threatening to set new records. September played a pivotal role in this trend, as state and local governments made a substantial impact, spearheading larger deals primarily aimed at new money flows. Citing data from LSEG, the gross issuance surged by an impressive 44.5% year-over-year, showcasing not only a recovery from the pandemic-induced economic fluctuations but also a proactive approach in anticipation of political uncertainties related to upcoming elections.
The bond issuance for September reached a staggering $44.628 billion distributed across 752 issues. This contrasts sharply with the $30.88 billion from 619 issues during the same month in 2023. What’s even more striking is that this volume exceeds the decade-long average of $35.679 billion, depicting not just recovery but growth. For the year thus far, the total issuance stands at $380.423 billion, a 35.2% upswing from last year, dangerously close to the entirety of 2023’s issuance total of $384.715 billion.
To surpass the record-setting issuance of 2020, which topped $484.601 billion, the final three months of 2024 would need to yield over $104 billion. The momentum around bond offerings appears self-sustaining, reflecting market confidence among issuers.
One of the key influencers driving this spurt in issuance is the waning of pandemic relief funds. As governments transition away from COVID-era support, the necessity for new funding becomes increasingly evident. Drew Gurley of Siebert Williams Shank highlights this shift by noting that the absence of pandemic aid has compelled many issuers to explore fresh pools of financing in the municipal market.
Tax-exempt bonds significantly contributed to this rise, with September witnessing a 46.6% year-over-year lift in tax-exempt issuance, moving from $27.923 billion in 2023 to an impressive $40.944 billion in 2024. Meanwhile, taxable issuance saw an explosion, increasing by a staggering 135.6%, which is indicative of a broader acceptance by investors toward more diverse offerings.
The surge in issuance is also significantly attributable to mega deals that have entered the fray. Notably, September featured substantial transactions such as $1.6 billion general obligations from Washington, D.C., and equally vast state water implementation revenue bonds from Texas. These landmark deals illustrate an evolving landscape where larger issues are not merely accepted but are actively sought after by investors.
Kim Olsan from NewSquare Capital noted that favorable financing rates have birthed an environment where issuers are inclined to venture into the market with billion-dollar offerings. The perception of risk linked to such large-scale issuances appears to be diminishing, suggesting a maturing bond market landscape.
As the political landscape grows increasingly charged with election-related uncertainty, many issuers are rushing to finalize their offerings ahead of potential market volatility. Examining past election cycles, both 2016 and 2020 produced significant year-end issuance figures, prompting a wave of proactive strategies from issuers who learned from previous experiences.
Gurley indicates that many players in the market are attempting to sidestep the disruptive aftermath linked to elections, reminiscent of the volatility seen after Trump’s election in 2016. These proactive measures underscore the fluid dynamics between political events and market behavior.
From a geographical perspective, Texas has emerged as a powerhouse in bond issuance, accounting for $56.138 billion year-to-date—a 12.5% increase from the previous year. Following closely, California stands at $55.454 billion, while New York’s issuance reached $43.081 billion. Such figures exhibit robust growth across the board, with Florida and Massachusetts showing staggering increases of 117.8% and 113.2%, respectively.
This regional analysis signals a broad-based recovery where municipalities are not merely participating but are also competing aggressively for financial resources. The continuation of these trends places significant upward pressure on bond markets as issuers signal their readiness to move forward, despite the broader geopolitical uncertainties.
The bond market is at a critical juncture, balancing between unprecedented issuance levels and the uncertainties presented by a volatile political landscape. The prospects for the final quarter of 2024 remain high, with ongoing demand and a significant backlog of issuances expected. Investors and issuers alike must continue to monitor market trends closely, adjusting strategies to capitalize on favorable conditions while being cautious of potential headwinds as election season approaches.