Wall Street’s Muni Desks Join in Bond Boom as New Sales Surge

Business is booming for Wall Street’s municipal-bond bankers.

With borrowing costs holding near the lowest in more than six decades, debt sales by state and local governments jumped to $45.4 billion so far this month. That’s the most since October and nearly triple what it was in March, when fear unleashed by the coronavirus roiled the bond markets.

Wall Street’s Muni Desks Join in Bond Boom as New Sales Surge

The jump joins a broader surge in borrowing in fixed-income markets, with companies also stepping up debt sales as interest rates fall and the steep economic slowdown heightens the need for cash.

The increase in the $3.9 trillion municipal market has been driven by taxable bonds, which accounted for more than a third of the issuance this month, said Eric Kazatsky, senior municipal strategist for Bloomberg Intelligence.

That’s been driven by a combination of ultra low interest rates, the 2017 federal tax law change that pulled the tax-exemption from bonds sold for a key refinancing tactic, and the fact that tax-exempt bonds carry rules about how the funds can be spent, Kazatsky said.

Year-to-date taxable bond issuance is the most since 2010, when the Build American Bond infrastructure program was in place, according to a Bloomberg Intelligence note.

“It seems to me that the attraction is growing for taxable munis,” he said.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.