As the U.S. economy expands and the Federal Reserve continues its gradual uptick on medium- to long-term interest rates, overall bond issuance is forecasted to decline 13.3% to $3.56 trillion in 2006, compared to $4.10 trillion in 2005, according to results from a recent Bond Market Association survey. However, while issuance is expected to fall in interest rate-sensitive sectors, it is anticipated to either stay steady or rise in others that are not driven by rate fluctuations.
It is projected higher rates will have the greatest effect on MBS issuance, according to the BMA's 2006 credit market issuance outlook. Mortgage-related issuance is expected to fall 20.2% to $1.68 trillion in 2006, compared to $2.10 recorded in 2005. The estimate comes in light of rising mortgage rates and a slower growth in the housing sector.