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The 2017 spring and summer redemption season is expected to eclipse the previous record for called and maturing bond proceeds, freeing up an unprecedented amount of cash for new investment, municipal market sources said.
The three months starting in June are known for delivering the heaviest volume of called and maturing bonds in any given year. This year the annual occurrence is expected to be record-breaking, with over $100 billion of called and maturing bond proceeds — excluding coupon payments — slated to arrive into investors' accounts over the three-month span, according to proprietary data provided by municipal managers, analysts, and industry experts.
"We will basically have the most amount of money available to investors since day one of our business," Sean Duffy, managing director and head of municipal sales at Siebert Cisneros Shank, in New York, said in an interview last week. Siebert estimates the three-month volume of redemptions at $125 billion, which would beat the previous record for the three months set in 2015 when $117 billion in calls and maturities came due, he said.
The biggest monthly glut of redemptions will arrive in June when a minimum of $44.5 billion is expected to come due to investors from bonds called and maturing, followed by a minimum of $40 billion a month in both July and August, according to Duffy's figures.
This year's total consists of about $32 billion in called bonds and approximately $93 billion in maturing bonds, compared with the previous record in 2015 when $40.67 in called bonds and $76.52 billion in maturing bonds were redeemed from June through August, Siebert's data show.
It is difficult to predict what bonds will be refunded in the next three months, said Peter Delahunt, managing director of municipals at Raymond James. However, current and advanced refundings could increase reinvestment needs beyond what is already expected — as it did last year when $36 billion of bonds were currently called or refunded due to low interest rates between June and August. An additional $31 billion in bonds were also advance refunded, he said.
"There was a significant amount of monies needing to be re-invested last year, and there will be again this year," Delahunt said.
REDEMPTION SEASON
Redemptions will grow to record numbers largely...