(Bloomberg) -- It’s already a record-setting year for muni-bond sales, and the relentless pace of mega-deals — those over $1 billion — is displaying little signs of slowing.
State and local governments rushing to raise cash ahead of the presidential election in November have driven sales to $325 billion so far this year, an all-time high for the period, according to data compiled by Bloomberg going back to 2013. Some $65 billion of those offerings are mega-deals, the most in at least a decade.
And more jumbo debt sales are planned for September. The pipeline of scheduled deals rose to about $20 billion as of Wednesday, the highest in more than two years, according to a Bloomberg index of scheduled sales over the next 30 days. That figure typically represents a fraction of what comes to market as many deals are announced with less than a month’s notice.
Municipalities are rushing to borrow as the bond market rallies ahead of interest-rate cuts from the Federal Reserve, expected to start as soon as this month. There’s also a race to get deals done ahead of an election which threatens to upend markets.
“Expected rate cuts for this month’s meeting appear largely built into the current muni curve, so waiting until after the election may not yield materially different results,” said Kimberly Olsan, senior fixed income portfolio manager at NewSquare Capital LLC.
Next week, the state of Illinois is kicking off a total of $1.7 billion of tax-exempt and taxable bond offerings and a New York City authority is coming to market with a $1.5 billion tax-exempt and $300 million taxable deal. That will be followed by more large-sized deals: the Los Angeles Unified School District is considering a $1.1 billion transaction in September, and the Texas Water Development Board is planning to sell $1.8 billion of bonds later this month.
“The current fixation on the primary market is less likely to change entering September,” Bank of America Corp. strategists wrote in a note dated Friday. With 2024’s average monthly issuance volume more than $40 billion, the market is on track to reach or exceed the bank’s $460 billion target for the year.
Already, last month saw the most supply in August for any year dating back to 2013, with $49 billion of muni bonds sold, Bloomberg-compiled data show. It was also the biggest supply month since October 2020 — the last time municipalities rushed to borrow before a presidential election.
In 2016, after former President Donald Trump’s surprise win, bonds sold off dramatically, with the yield on the 10-year muni benchmark jumping nearly 60 basis points from Election Day to the end of the year. Investors speculated that Trump would pursue tax cuts that would reduce demand for muni bonds.
Following President Joe Biden’s election in 2020, muni yields ended the year lower.
The mega deals may not completely disappear after the election, though. Connecticut plans to sell $1 billion of bonds toward the end of the year, according to a filing.
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