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7 Things To Know About U.S. Capital Markets in Q1: SIFMA

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Total long-term securities issuance was $1.65 trillion in the first quarter of 2016, according to a recent report from the Securities Industry and Financial Markets Association.

This was an 11.6% increase from $1.48 trillion issued in the fourth quarter of 2015 but a 5.4% decline year over year from $1.75 trillion in the first quarter of 2015, according to the report.

SIFMA recently published its Research Quarterly Report for the first quarter of 2016, which compiles statistics, including issuance data, for a broad range of asset classes across the U.S. capital markets.

The report finds that issuance rose quarter to quarter across all asset classes – except mortgage-related securities issuance.

Here’s a breakdown of the seven asset classes included in SIFMA’s Research Quarterly report:

  • Municipal Bond Market

Long-term public municipal issuance volume, including private placements, totaled $99.7 billion in the first quarter of 2016, according to the report. This was an increase of 17.7% from the prior quarter ($84.7 billion) but a year-over-year decline of 8%.

  • Treasury Market

Total gross issuance of Treasury bills and coupons, including cash management bills, floating rate notes and Treasury inflation-protected Securities, was $2.14 trillion in 1Q’16, up 18% from $1.81 trillion in the fourth quarter of last year and a 24.6% year-over-year increase of $1.72 trillion.

SIFMA finds that U.S. Treasury net issuance, including cash management bills, decreased to a net $244 billion in the first quarter – but was a 72.8% increase from 1Q’15 net issuance of $141.2 billion.

  • Federal Agency Debt Market

Federal agency long-term debt issuance was $147 billion in the first quarter, a 20.9% increase from $125.5 billion in the prior quarter and 7.1% above 137.2 billion issued in the first quarter of 2015.  

  • Mortgage-Related Securities

Issuance of mortgage-related securities, including agency and nonagency passthroughs and collateralized mortgage obligations, totaled $326.3 billion in the first quarter. According to SIFMA, this was a 16.1% decline from $379.3 billion in the fourth quarter. This was the only asset class where issuance declined quarter to quarter.

However, mortgage-related securities still increased 1.6% year-over-year from $385.4 billion in the first quarter of 2015.

  • Asset-Backed Securities

Asset-backed securities issuance totaled $37.8 billion in the first quarter, an increase of 13.9% quarter over quarter but a decline of 36.4% year-over-year. The auto sector continued to lead issuance totals with $26.2 billion (69.3% of 1Q’16 total issuance), followed by esoteric asset-backed securities ($3.7 billion, or 9.7%).

According to SIFMA’s report, all sectors within asset-backed securities – except auto and equipment – experienced a decline in issuance volume in the first quarter. While auto rose 59.5% and equipment rose 11.4% quarter over quarter, housing-related asset-backed securities saw the largest drop at 57.3%, followed by those backed by student loans at 46.7% and esoteric asset-backed securities at 29.4%.

SIFMA finds that credit card asset-backed securities continued its decline from 2015, issuing a mere $2.4 billion, down 19.5% quarter-over-quarter.

  • Corporate Bond Market

Corporate bond issuance totaled $396 billion in the first quarter of 2016, which was a 34.6% quarter-over-quarter increase from the $294.1 billion issued in fourth quarter. However, this was 9.7% below a year ago’s issuance of $438.4 billion.

SIFMA finds that both the investment-grade sector and high-yield issuance rose for the quarter, with investment grade bonds’ issuance increasing at a much faster rate. The majority of the bonds issued in the first quarter were for general corporate purposes (64.5% of total issuance), followed by acquisition financing (16.2%), and reducing indebtness (7%).

  • Equity and Other Markets

The U.S. equity market posted mixed results in the first quarter of 2016, SIFMA reports. The S&P 500 closed the first quarter at 2,059.74, a 0.8% increase from the prior quarter but down 0.4% from a year ago. Meanwhile, the Nasdaq Composite Index finished the first quarter at 4,869.85, a 2.7% quarter-over-quarter loss and a 0.6% year-over-year decrease. And the Dow Jones industrial average finished the first quarter at 17,685.09, a 1.5% gain from the prior quarter but a 0.5% loss from a year ago.

— Check out The Hidden Costs of Passive Investing on ThinkAdvisor.


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