February 3, 2016 5:23 PM

Bankers predict slight, but not significant, impact of oil prices on bond sales

But that doesn’t mean some local governments won’t pull back

Bankers at a public finance conference on this week generally predicted only a slight drop in state bond issuance due to the ongoing slump in oil prices.

Douglas Hartman, executive director of J.P. Morgan Securities, said J.P. Morgan’s municipal bonds issuance had dropped from $400 billion to $375 billion, year over year. Hartman predicted Texas would follow a similar trend, a possible decrease of between 5 and 6 percent, but much would ride on interest rates.

“Our official position is that the feds will raise rates three times this year,” Hartman told the crowd at the Omni Barton Creek Resort. “I personally think that’s one too many. What we’ve seen with the fed rate increase in December is that it’s helped us with some escrows and made some refunding more attractive.”

In other words, when interest rates go up, financial activity on existing bonds goes up. Hartman also continues to be bullish on new bonds, predicting activity in all sectors of the market due to continuing pent up demand. The school district space has come out active in the first quarter of the year, along with demand for tuition revenue bonds, water bonds and anticipated road activity, Hartman said.

By Kimberly Reeves