Middle Market Firm Led Issuance Year-to-Date Ahead of Last Year; Third Quarter Issuance Declines

Regional firm-managed issuance in the municipal, corporate, federal agency and structured finance market sectors increased to $332.3 billion in the first three quarters of 2007, 10.7 percent above the $300.2 billion a year ago. Third quarter issuance was $83.3 billion, compared to $128.3 billion in the second quarter and $104.5 billion in the third quarter a year ago.

Issuance in all sectors, except for corporate bonds, increased year-to-date, compared to the same period last year. Third quarter middle market-led issuance was lower on a linked-quarter basis in all sectors as a result of credit risk repricing, reduced liquidity and the effect of mortgage, especially subprime, market weakness.

Subject to consumer spending vulnerabilities, the consensus forecast is for economic growth to continue at a below-trend rate. Global consumption, employment and income gains are compensating for weakness in the housing market, which is expected to continue into the next year. Notwithstanding the subdued economic outlook and still-fragile credit market conditions, investors are, in some cases, making distinctions between mortgage assets, where credit has deteriorated substantially, and other asset classes, which continue to exhibit stronger underlying fundamentals. However, liquidity conditions across the board are reduced substantially from one year ago and will affect middle-market-led underwriting volumes over the next few quarters.

About the Report

The report analyzes and presents aggregate information and trends related to bond and equity underwriting in which one or more middle market securities firms “non-primary dealers” are the lead underwriter or “book runner” on the deal based on publicly available information. The report’s bond coverage focuses on long-term transactions – those in which the stated original maturity at issuance is greater than thirteen months – and covers the range of fixed-income market sectors, including municipal bonds, corporate bonds, federal agency securities and asset-backed and private-label mortgage-backed securities. In addition, the report analyzes and presents middle market firm mergers and acquisition (M&A) advisory activity.

Credits

SIFMA Research

• Director, Research: Bryan Gross