Municipal bond issuance in the Southwest rose 29.8% to $50.6 billion in the first half of 2024, with Texas accounting for 65% of the volume amid a flood of debt from the education sector.
After a slump in the first quarter, emissions in the region rose 60.3% in the second quarter compared to the same period in 2023, according to LSEG Data & Analytics, formerly Refinitiv. Almost 21% of the nationwide volume, which rose 32.3% to $242.16 billion
Volumes rose in most of the region’s eight states, with only Arkansas and New Mexico falling below mid-2023 levels. The education sector, which accounted for the lion’s share of the region’s debt sales at $22.45 billion, saw a 44% increase. Treasury issuance slightly exceeded sales of public debt.
In Texas, bond sales rose 19% year-over-year to $33.14 billion, below California’s nearly $36.1 billion but above New York’s $28 billion, keeping the Lone Star State in the running for this year’s volume crown.
In 2023, Texas issuers sold $59 billion worth of debt.
“Texas continues to be a top issuance state due to strong growth and urgent infrastructure needs across the state,” Noe Hinojosa, president of Estrada Hinojosa & Company, said in an email. “School districts in particular continue to issue debt to accommodate the influx of new students due to the state’s growth.”
Texas had the largest population growth of any state between July 2022 and July 2023, gaining 473,453 people.
According to Hinojosa, Texas schools are on track to meet or possibly exceed the number of issuances and amount of debt they sell in 2023.
“We are about 60% through the year, and yet schools have only spent about 80% of last year’s volume,” he noted.
Education-related emissions in Texas totaled $16.29 billion in the first six months of 2024, up 46% from mid-2023, as public school districts
In the May 4 statewide bond election, voters approved $7.61 billion, or 74.7%, of the $10.18 billion in general obligation bonds for schools that were on the ballot, according to data from the Texas Bond Review Board. Meanwhile, the Houston Independent School District, the state’s largest public school system,
Eligible public and charter school bonds in Texas include
Texas made the biggest deals in the region, led by a nearly $1.1 billion San Antonio electric and gas system revenue bond issued by Jefferies and Wells Fargo Securities in June, followed by a $950 million Harris County toll road senior revenue and redemption bond issued by Raymond James in May and a nearly $870.3 million Houston combined utility system senior revenue and redemption bond issued by Jefferies in April. Coming in fourth was Midland Independent School District, which issued $860.6 million in GO bonds through Raymond James in March.
The Colorado Health Facilities Authority was the region’s largest issuer with $2.03 billion in conduit debt, including $1.1 billion in revenue bonds for Intermountain Health in June. The University of Texas System Board of Regents was second with $1.627 billion in bonds, and San Antonio was third with its $1.1 billion June deal.
Jefferies, which rose from third place in 2022 to first place among underwriters for Southwest deals in 2023, ranked first in the first half of 2024, borrowing $5.855 billion in debt from LSEG. RBC Capital Markets came in second with $4.648 billion in bonds, followed by Raymond James with $4.553 billion, Wells Fargo with $4.297 billion and Piper Sandler with $3.1 billion.
The authority of RBC and Wells Fargo, as well as the other ten largest underwriters in the Southwest, BofA Securities, JP Morgan Securities and Morgan Stanley, to underwrite public debt in Texas is
The state passed legislation in 2021 banning state and local contracts valued at $100,000 or more with banks and financial firms that “boycott” or “discriminate” against the fossil fuel or weapons industries. So far, Barclays, as well as UBS and Citigroup, have been excluded from the municipal bond market.
In the half-year ranking of underwriters for Texas, Jefferies took first place, followed by Raymond James, Wells Fargo, Piper Sandler and JP Morgan.
In Oklahoma, which has a similar ban on companies “boycotting” energy companies and divestment requirements for pension funds, the top five underwriters were DA Davidson, BOK Financial Securities, Robert W. Baird, Goldman Sachs and Morgan Stanley. The state’s boycott list includes Barclays, BofA, JP Morgan and Wells Fargo.
Enforcement of the state’s Energy Discrimination Elimination Act of 2022 was
Several studies have pointed to negative financial and economic impacts of the bans in Texas and Oklahoma due to reduced competition among insurers. The Texas-based American Energy Institute
Hilltop Securities, the busiest financial adviser to Southwest’s deals last year, maintained that position for the first half of 2024 and was rated by LSEG at $10.291 billion in debt, followed by PFM Financial Advisers at $4.680 billion, Estrada Hinojosa at nearly $2.779 billion and Specialized Public Finance at $2.726 billion.
McCall Parkhurst & Horton tops the bond advisor rankings with nearly $11.795 billion in debt, after taking the top spot in 2024. Bracewell came in second with $5.491 billion, followed by Norton Rose Fulbright with $3.7 billion and Orrick Herrington & Sutcliffe with $3.112 billion.
The same financial advisory and bond advisory firms ranked the same in transactions in Texas during the first half of the year.
The Southwest region consists of Arkansas, Arizona, Colorado, Kansas, New Mexico, Oklahoma, Texas and Utah.