The municipal bond market is on track for a record year of issuance which could surpass $500 billion by year-end. Municipal borrowers have sold about $426 billion in 2025, about 15% above last year’s volume, according to Bloomberg.
Municipalities are worried about losing access to tax-exempt issuing or federal dollars as the current administration makes changes. Borrowers are locking in financing now to make sure they don’t get shut out down the road.
The increase in municipal bond issuance can have both positive and negative implications for the market.
On the positive side, higher issuance provides investors with a wider array of investment options and diversity within bond portfolios, helping investors manage risk more effectively. A greater volume of bonds in the market can improve liquidity. This means that investors can buy and sell bonds more easily, leading to more efficient pricing.
On the negative side, as the volume of bonds increases, there is potential for rising rates. If issuances outpace demand, it could lead to higher yields, making it more expensive for municipalities to borrow in the future. Also, if too many bonds are issued at once, the market could become saturated. This oversupply can drive prices down and yields up making it bad for issuers and current bond holders but ideal for buyers waiting for better returns.
In summary, while increased municipal bond issuance can provide crucial funding for projects and create investment opportunities, it also comes with risks associated with market saturation and yield fluctuations. Balancing these factors is essential for ensuring a healthy and sustainable municipal bond market.
Bottom line: We have seen yields across the curve drop, around 25bps on the longer end and around 10bps on the shorter end. We do expect yields to move up slightly and have seen this move this week. We expect yields to move up another 5bps until “settling in” and then all eyes will start to turn to the October FOMC meeting.
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Yield to call (YTC) is not indicative of total return; this yield is valid only if the security is called. Bonds may or may not be called, or be callable on multiple dates or, in other cases, called any date following the first call date, so yield to call is based on the earliest stated call date. Discounted bonds may be subject to capital gains tax. Bonds may be subject to OID (Original Issue Discount). Prices and availability may change at anytime without notice.
Do not buy bonds based on the Yield to Call (YTC). Insured bonds are issued for timely payment of principal and interest only. Insured bonds do not cover potential market loss and are subject to the claims paying ability of the insurance company.
Non-rated (NR), With-Drawn (WR), or below investment grade bonds, lower rated bonds, carry a greater potential risk of default & should be considered by sophisticated investors only.
This document is for informational purposes only and does not replace or serve as a substitute for your official monthly statement generated by NFS. Please refer to your official statement for accurate and comprehensive account details.
Bonds may be subject to capital gains tax. This summary is for informational purposes only and is not an offer or solicitation for the purchase or sale of any security or a recommendation or endorsement of any security or issuer. NewEdge Securities, LLC. and DRL Group make no representation about the accuracy, completeness, or timeliness of this information. Bonds could also be subject to the DeMinimis Rule, please consult with your tax advisor for further clarification.
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