Economics

Tax Reform Proposals Spur End-of-Year Surge in Muni Volume

CUSIP Request Volume Reverses Course, Signals Upswing In New Corporate And Muni Bond Issuance

Tax Reform Proposals Spur End-of-Year Surge in Muni Volume

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NEW YORK, NY, DECEMBER 13, 2017 – CUSIP Global Services (CGS) today announced the release of its CUSIP Issuance Trends Report for November 2017. The report, which tracks the issuance of new security identifiers as an early indicator of debt and capital markets activity, found across-the-board increases in CUSIP request volume for corporate and municipal debt this month. This is suggestive of an increased pace of new security issuance in the final weeks of 2017 and into the new year.

CUSIP identifier requests for the broad category of U.S. and Canadian corporate offerings, which includes both equity and debt, totaled 4,528 in November, up 10% from October, driven primarily by a 13% increase in requests for new corporate debt identifiers. By contrast, requests for corporate equity identifiers decreased 28% during the month of November. So far this year, demand for new CUSIPs for both corporate debt and equity offerings are up 19% over the same period in 2016.

Municipal CUSIP requests increased in November. A total of 1,220 municipal bond identifier requests were made during the month, an increase of 20% from October. The surge is due in large part to a tax reform proposal from the House, which introduces a prohibition on advanced refundings, which states and municipalities use to reduce borrowing costs, and on private activity bonds. The Senate version of the bill preserves private activity bonds, but eliminates advance refundings. On a year-over-year basis, municipal request volume was down 23% through the end of November 2017, reflecting ongoing volatility in municipal issuance volumes over the course of this year.

“Starting in the last week of November and continuing so far into December, we’ve been seeing a significant increase in requests for municipal refunding bond and private activity bond identifiers as issuers rush to raise capital ahead of tax reform,” said Gerard Faulkner, Director of Operations for CUSIP Global Services. “Depending on whether the House or Senate version of the tax reform bill is passed, advance refundings and private activity bonds could be terminated, which could significantly alter the muni landscape.”

International debt and equity CUSIP International Numbers (CINS) both grew in November. International equity CINS were up 19% during the month, and international debt CINS increased 3% during the month. On a year-over-year basis, international equity requests were down 9% and international debt requests were up 44%, reflecting continued volatility in international markets.

“This year has been marked by a fair amount of month-to-month volatility in new CUSIP request volume as issuers have hewed closely to central bank and market sentiment when it comes to raising new securities offerings,” said Richard Peterson, Senior Director, S&P Global Market Intelligence. “Now, as 2017 draws to a close, with potentially significant tax reforms looming and interest rates still relatively low, issuers are ramping up issuance to take advantage of the current favorable environment.”

To view a copy of the full CUSIP Issuance Trends report, please click here.

Following is a breakdown of New CUSIP Identifier requests by asset class year-to-date, through November 2017:

Signals Upswing In New Corporate And Muni Bond Issuance

About CUSIP Global Services

The financial services industry relies on CGS’ unrivaled experience in uniquely identifying instruments and entities to support efficient global capital markets. Its extensive focus on standardization over the past 50 years has helped CGS earn its reputation as a trusted originator of quality identifiers and descriptive data, ensuring that essential front- and back-office functions run smoothly. Relied upon worldwide as the industry standard provider of reliable, timely reference data, CGS is also a founding member and co-operates the Association of National Numbering Agencies (ANNA) Service Bureau, a global security and entity identifier database for over 34 million public and privately traded instruments, contributed by 92 national numbering agencies and 27 partner agencies representing 255 different countries. CGS is managed on behalf of the American Bankers Association (ABA) by S&P Global Market Intelligence, with a Board of Trustees that represents the voices of leading financial institutions. For more information, visit www.cusip.com.

About The American Bankers Association

The American Bankers Association represents banks of all sizes and charters and is the voice for the nation’s $13 trillion banking industry and its 2 million employees.  Learn more at www.aba.com.