It’s time for the annual “Guess the Issuance” blog.
Last year I predicted market issuance would be somewhat stable compared to 2024. I was wrong…I’m just going to take it on the chin!!
Market issuance increased from $507.6* to $579.9**. My gut feeling was bond issuance was going to increase size, compared to 2024, but I decided to base my prediction issuance amount solely on the average of 12 publicly available investment banks issuance projections.
That will teach me.
There was a “rush to the market” feeling in 2025 as the federal government was deciding to either keep, reduce, or eliminate tax-exemption issuance.
In the end, municipal tax-exemption was not eliminated or modified at all.
Does that issue continue through 2026 as the federal government once again considers “attacking” tax-exemption to help pay for future programs (e.g., reduced medical costs)?
Only time will tell.
The first step I am taking to help me predict 2026 issuance is to look at the 2025 issuance amounts and yield rate movements.
1. Below is a chart displaying the historical issuance of municipal bonds over the past several years:
| 2021* | $483.2 billion |
| 2022* | $391.0 billion ⬇️ |
| 2023* | $379.9 billion ⬇️ |
| 2024* | $507.6 billion ⬆️ |
| 2025** | $579.9 billion ⬆️ |
Source: *Bond Buyer Market Data1 ** LSEG Data
2. Municipal yield rates stayed within a relatively tight 100-basis-point range for most of the year, with an April cut in response to newly announced tariffs.
3. Fed Funds were relatively flat until September when the Fed started lowering the rate, ending below 4.00%.
4. Issuance in the beginning half of 2025 remained high.
| Year | January through June Issuance2 |
| 2022 | 218.4 billion |
| 2023 | 182.6 billion ⬇️ |
| 2024 | 244.6 billion ⬆️ |
| 2025 | 283.7 billion ⬆️ |
In conclusion, both the initial and mid-year revised estimates for 2025 suggested that the slowdown in new money issuance during 2024 was more than offset by a strong rebound in new money transactions in 2025.
Also, 2025 had an overall drop in refunding issuance- although tender offer refundings continued to be prevalent.
The average 2025 issuance prediction from the 12 investment banks I used was approximately $507 billion (at the beginning of the year). This was well below the actual $580 billion sold in the market.
This year I am basing my prediction on my “gut feeling” based on the information below.
The second step I am taking in predicting the 2026 issuance is to look at what are the potential economic positives and roadblocks for municipalities in 2026:
1. Although it escaped in 2025 modification/elimination, issuance of tax-exempt bonds by municipalities will potentially be under fire again by Congress until a final “budget” is adopted. At this point all the budget except funding of the Department of Homeland Security (i.e., ICE, border protection and customs) has been adopted. There is currently a 2 week period to finalize ICE’s budget with the Democrats wanting to reduce the ICE budget.
2. There has been a move to reduce Federal Assistance Dollars to states, especially “blue” states. This has a major effect on municipal balance sheets.
3. The federal government is going to be using federal stimulus money to target infrastructure projects throughout the country.
4. The federal government is reducing funds targeting energy efficient projects (e.g. wind turbine farms), thus reducing the amount of municipal bond issuance to fund these types of projects.
5. There are more projected private public partnerships (PPP) financings expected in 2026 with municipalities expecting to have less money to fund “elective” projects.
6. Just like 2024, over $100 billion(3) in bond referendums were approved by voters in 2025. That does not mean that all $100 billion will be issued in 2026- but a portion will.
Ballotpedia tracked 322 local ballot measures in 2025, of which 258 (≈80%) were approved.
7. Although the Fed started lowering interest rates in the 3rd and 4th quarter of 2025, due to multiple concerns including inflation, it’s unclear how many more cuts will occur in 2025.
*Of note, Fed Chairman Powell will be leaving in May, replaced by Kevin Warsh. The new chairman will probably follow the White House’s suggestion and continue to lower rates, which could increase both new money issuance and refunding issuance.
8. The Infrastructure Investment and Jobs Act (IIJA), also known as the Bi-Partisan Infrastructure Law, is a bill President Joe Biden signed into office on November 15, 2021.
The IIJA provides $973 billion over the course of five years from fiscal year 2022 through fiscal year 20263. Its objective is to continue to spend on essential infrastructure projects to create jobs in the USA. The assignment of projects and the release of money is subject to federal governmental objectives.
9. Will bond market participants move to the sidelines if current bond yields continue to be reduced or will they continue to participate in the bond market?
There is minimal stability in the market.
As I reviewed several investment banks’ analyses of why they were estimating the amount of municipal issuance in 2026, each had a reason why issuance will go up versus 2025 and few had any reasons why issuance will go down versus 2025 (i.e., there is a consensus that municipal issuance will either (1) remain at the 2025 level, or (2) increase in 2026).
Please note that even my “Magic 8 Ball” cannot tell me what the federal government will do during the year.
| My Estimate | $625 billion |
| Average Estimate | $600 billion |
| Maximum Estimate | $650 billion |
| Minimum Estimate | $530 billion |
| Number of Estimates | 12 |
As always, please feel free to connect with me on LinkedIn if you have any additional thoughts I might have left out that you feel are relevant.
1 Bond Buyer’s monthly “A Decade of Municipal Bond Finance” table
2 American Rescue Plan Act - National League of Cities (nlc.org)
3 The Structure and Funding of the IIJA (acgadvocacy.com)
4 Build America Mutual (BAM) 2024 Year in Review
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