Research Quarterly: U.S. Bond Issuance on Record Pace in First-Half 2002

New-issue volume in the U.S. bond markets totaled $2.5 trillion for the first half of 2002, up 16.8 percent from the $2.1 trillion issued during the same period last year. The strong increase was led by rapid growth in mortgage-related securities offerings, increased investor demand for bonds and a low-interest-rate environment, according to the Association’s most recent Research Quarterly.

    Similar to first-quarter results, mortgage-related securities issuance, including agency and private-label pass-throughs and collateralized mortgage obligations (CMOs), led the surge in issuance, totaling $1.01 trillion in the first half of this year, up 51.6 percent from the $664.1 billion issued during the same period in 2001. The increase in issuance is due primarily to refinancing activity and mortgage originations, the report noted.

    While issuance was higher in almost all sectors of the fixed-income markets, volume in the corporate bond market decreased by 25.6 percent in the first half of 2002, compared to the same period last year. The slowdown was due to generally weak corporate profitability and corporations’ reduced capital needs.

    Meanwhile, municipal issuance reached a record $194.6 billion in the first half of 2002, topping the previous half-year record, set in the second half of 2001. Increased capital needs of state and local governments, as well as lower interest rates and a rise in demand from investors shifting out of equities, helped generate the first-half volume increase.

    U.S. Treasury gross coupon issuance increased 50.0 percent, to $233.1 billion, during the first half of 2002, compared to $155.1 billion in the year-ago period.

    Federal agency long-term new-issue volume increased during the first half of the year, to $453.7 billion. Short-term federal agency debt outstanding decreased 4.0 percent, to $651.9 billion, as of the end of June.

    Asset-backed issuance increased to $237.9 billion, up 6.2 percent from the $223.9 billion issued during the same period last year.

    Outstanding commercial paper decreased 4.1 percent, to $1.32 trillion, at the end of the second quarter, down from $1.38 trillion at the end of the first quarter. Concerns over issuer credit quality have led to a decrease in the use of commercial paper in recent quarters.

    Secondary market trading volume was up across all reported markets, with the exception of the federal agency and corporate bond markets.

    The complete Research Quarterly is available on the Association’s Web site.

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