NEW YORK (CNNMoney) -- Always wanted to own a little piece of your local incinerator? Well you might be out of luck.
Municipal bond issuance is on track to log its lowest quarter in more than a decade, according to Thomson Reuters.
Only $32.5 billion in muni bonds have been issued this year, as of Tuesday. That's down from $61.1 billion over the same time period last year. And the number is on track to fall far below the $132.8 billion level registered in the fourth quarter of 2010.
The drop in issuance comes amidst a sustained muni bonds sell-off, as worried retail investors flee the market and the media continues to churn out stories about state and local governments struggling with severe budget shortfalls.
Elected officials are racing to close the gap between state revenues and expenditures, but, generally speaking, they are not issuing lots of new debt.
Instead, lawmakers are employing tax increases and spending cuts to try to bridge the budget gap.
In the past, they might have kicked the can down the road, and issued muni bonds to help fill that gap. It's one tool lawmakers can use to raise money, but it's not a really popular one at the moment.
Ebby Gerry, the managing director and head of municipal fixed income at UBS Global Asset Management, said that, while it's not the biggest factor, the new political atmosphere that has emerged in the wake of the November elections has contributed to the decline in muni issuance.
Gerry says lawmakers are now eager to be more responsible and more conservative in their fiscal management, and "less dependent on debt" at the state level.
California is a prime example, with newly elected Gov. Jerry Brown making deep cuts to his state budget. At the same time, he has said the state won't offer any muni bonds until later this year.
Gerry said that at the same time last year, it might have been a different story.
But other factors are also at work. The expiration of the popular Build America Bond program at the end of 2010 caused debt issuers to front load much of what would have normally been issued in the first quarter of this year.
"The main reason [for the current low levels] is the pop in the fourth quarter of last year," said Craig Elder, senior fixed income analyst at Robert W. Baird & Co. "We crammed in $133 billion over the last quarter."
There is also the issue of demand.
Analysts say they have seen a flood of retail investors -- who make up the bulk of muni bond buyers -- leave the market in the first quarter.
The outflows come in the wake of doomsday prognostications about the health of state and local governments, including Meredith Whitney's prediction of up to 100 sizable defaults in the muni bond market -- broadcast to the nation during a "60 Minutes" interview.
The simultaneous decline of supply and demand is also causing trouble for market mechanics. The muni bond market is, by nature, opaque and reliant on blockbuster bond issuances to set accurate prices for the rest of the market.
But there are fresh indications that the market might be on its way back. After declining each month since October, issuances picked up in February.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||4.04%||4.16%|
|15 yr fixed||3.15%||3.15%|
|30 yr refi||4.15%||4.23%|
|15 yr refi||3.26%||3.22%|
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