According to Thomson Reuters, healthcare borrowings were down 27% for Q1 of 2012 compared to last year. This came as a surprise as overall municipal volumes were up 63% when a number of borrowers took advantage of low rates to refund their bonds.

The contrarian first quarter we just experienced was all the more remarkable given that healthcare borrowings in 2011 were already at very low levels.

The data from Thomson Reuters includes private placements, so bank direct placements can’t be blamed for the low volumes, but there may be other reasons.

The stubbornly-high healthcare credit spreads may be wiping out much of the savings that hospitals could otherwise realize from the low Municipal Market Data “AAA” index and other benchmark rates.

Some hospitals may be holding off on refundings while they are preparing to borrow for “new money” projects, at which point they will combine the two. Infrastructure borrowers on the other hand may not have any new money projects holding them back.

We also see a belief shared by many healthcare financial executives that with the Fed committed to keeping rates low, there is minimal incentive to rush to market and lock in the current rates.

The trend may be reversing: March healthcare volumes were up 33% from 2011. Without jumping to conclusion this early in the year, this may be an indication that hospitals are finally joining the refunding party, in spite of structural hurdles. There seems to be a good “pipeline” of bond issues building, so the next couple of months may see increased borrowings from hospitals.