(Bloomberg) -- US state and local governments are poised to sell record levels of debt this year as borrowers continue to flood the market while conditions remain attractive.
“This year has a momentum that’s extraordinary,” said Paul Creedon, head of national infrastructure at Janney Montgomery Scott in a market outlook panel at the Bond Buyer’s Infrastructure Conference in Philadelphia on Tuesday. “It’s probably going to shatter a lot of records.”
Municipal borrowers have sold nearly $350 billion of bonds over the last nine months, a figure that is running 38% above last year’s volume and poised be to largest amount in at least a decade, according to data compiled by Bloomberg. Some of that issuance was accelerated as issuers seek to avoid market volatility caused by the US election in November.
“We don’t wake up on the Wednesday after elections and know who is in what seat and what their plans are,” Creedon said. Governments may “push past” the election and continue to tap the capital markets to raise money through the rest of 2024, he said.
Governments had pulled back borrowing for several years as pandemic-era stimulus aid left budgets flush with cash and borrowing costs rose after the Federal Reserve increased interest rates.
“People are getting used to rates above zero, we’ve worked through supply chain disruptions, we’ve gotten used to project cost inflation,” Rob Dailey, head of public finance at PNC, said on the panel. “The rest of the year looks strong.”
While the uptick in issuance is a part of a frenzied effort by issuers to get ahead of potential turbulence from the presidential election, there are a slew of other factors on the radar that could impact the market.
“There’s a potential for this to be the beginning of what could be looked at as a golden age for infrastructure project finance for the next five to six years,” said Dailey. But in addition to the outcome of the election, murky state balance sheets and the unclear future of the rate backdrop could suppress sales, he added.
--With assistance from Beth Williams.
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