The total municipal bond issuance, both short- and long-term, will reach $349.5 billion in 2014, down from $366.1 billion estimated issuance in 2013, according to SIFMA’s latest 2014 Municipal Bond Issuance survey.

Both short-term and long-term issuance is expected to fall in 2014, with $40.0 billion in short-term notes expected in 2014, compared to $53.6 billion issued in 2013; and $309.5 billion in long-term bills expected in 2014, compared with $312.5 billion issued in 2013.

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"Looking ahead, we expect municipal new-issue volume will be flat to lower in 2014," said Michael Decker, managing director and co-head of the Municipal Securities Group at SIFMA. "Although the overall systemic credit quality of the municipal market is strong, state and local issuers remain pressured by a moderate recovery, and the refunding wave has waned."

Other highlights from the survey include:

  • Projected long-term tax-exempt municipal issuance to reach $265 billion in 2014, a 0.7 percent decline from the $266.7 billion issued year to date in 2013;
  • Projected long-term taxable municipal issuance is expected to be $33.5 billion, a 5.7 percent decline from actual issuance in 2013;
  • Long-term alternative minimum tax (AMT) issuance is projected to rise to $11.0 billion in 2014, a 7.6 percent increase from 2013 issuance;
  • Variable-rate demand obligation (VRDO) issuance to rise slightly to $10.0 billion in 2014, recovering from the record low of $8.3 billion estimated to be issued in 2013.

Interest Rate Forecast

Survey respondents offered relatively uniform views on interest rates in the coming year. The federal fund rate was expected to remain unchanged in 2014. Forecasts include:

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Two-year Treasury note yield was expected to rise from 0.34 percent end-December 2013 to 0.69 percent by end-December 2014.
10-year Treasury note yield was expected to climb from 2.77 percent end-December 2013 to 3.5 percent end-December 2014.