07/13/2017

Got Bonds? An update on Oregon municipal bond issuance

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2017 has seen a significant shift in issuance due to the $1.76 billion in general obligation bonds approved during the November election and the $1.5 billion approved during the May election. As a result, new money issues have lead the charge in Oregon in 2017. Overall, 2017 has been a strong year for issuance with new issues outpacing last year at over twice the issuance through June. Yet, due to a large amount of maturities and calls, demand remains robust with new issues continuing to price aggressively. Net issuance is the difference between the volume of municipal bonds issued and the amount matured or called. Net issuance in Oregon for the first half of the year has been positive. However, in June, net issuance plummeted by $2.56 billion due to $2.17 billion of municipal bonds maturing or being called.

Oregon Bond Net

Source: Bloomberg

Demand for Oregon bonds has strengthened in recent months due not only to the impact declining net issuance, but also the increased dollars sitting on the sidelines as the result of bonds maturing or being called. We expect supply constraints and strong demand for municipal bonds will continue for at least the next several months as municipal bond issuance is unlikely to satisfy investor demand. Lipper US Fund Flows data released recently indicates municipal bond mutual funds have seen an average weekly year-to-date inflow of approximately $236 million as investors are facing increasing difficulty sourcing bonds. In addition, credit spreads between high and low investment grade municipal bonds have tightened to the point that investors are assuming measurable credit risk for the addition of only a few basis points.

Tim Iltz
Vice President, Municipal Bond Credit Analyst
Kirkpatrick Pettis Capital Management


Investments in bonds may decline in value due to rising interest rates, a real or perceived decline in credit quality of the issuer, borrower, counterparty, or collateral, adverse tax or legislative changes, court decisions, market or economic conditions.