US Municipal Bond Sales Reach $315 Billion... Largest in 11 Years

This Year's Local Bond Sales Hit Highest Since 2013
Impact of 'Base Rate Cut' and 'Presidential Election'

In the United States, where two major events?the base interest rate cut and the presidential election?are approaching, municipal bonds are gaining popularity.

According to Bloomberg on the 27th (local time), the sales volume of U.S. municipal bonds so far this year reached $315 billion, marking the largest scale since 2013. The popularity of municipal bonds is attributed to multiple factors.

First, with growing expectations for a base interest rate cut by the U.S. central bank, the Federal Reserve (Fed), within this year, and the anticipated specific pivot (direction change) in monetary policy expected next month, buying demand surged. Additionally, issuers such as states and local governments hurried to issue new bonds ahead of the November election to reduce market volatility, which also influenced the trend.

The yields on municipal bonds, which had lagged behind U.S. Treasury bonds, have also increased. For example, the yield on "U.S. 10-year AAA municipal bonds" is about 70% of that of U.S. Treasury bonds with similar maturity and rating. This is higher compared to the yield in spring (57%). Bloomberg explained, "The higher the yield of municipal bonds relative to Treasury bonds, the greater the attractiveness of municipal bonds."

The municipal bond buying strategy is expected to remain valid for the time being. On the 26th, Nuveen Asset Management, a U.S.-based firm, stated in an investment memo that "the influx of new municipal bonds will provide attractive entry points." Peter DeGroot, a strategist at JP Morgan, emphasized in a memo on the same day that "the next two months could be the best buying opportunity of the year."

Meanwhile, a similar trend is being observed in the low-credit, high-yield junk bond market. According to Barclays, companies are expected to issue $55 billion to $65 billion worth of junk bonds and leveraged loans next month, an amount larger than this month. Bloomberg reported, "Early September and October could be the last opportunity this year for investors to purchase newly issued high-yield bonds."

This content was produced with the assistance of AI translation services.