Jessica Lerner

"Normalized supply, a supportive rate environment and favorable technicals propelled the municipal market to the best October performance [in decades]," said Robert J. Lind.

Issuance year-to-date is $493.063 billion, up 9.3% from $451.079 billion over the same period. With issuance estimated at $13.118 billion in the first week of November, 2024's $500-plus billion record should fall within the next week or two.

Technicals are supposed to become slightly more favorable into year-end, said Jeremy Holtz, a portfolio manager at Income Research + Management.

"The knee-jerk reaction of the markets to the Fed meeting (and press conference) was to sell stocks and bonds, because [Fed] Chairman Jerome Powell said that an additional rate cut in December wasn't a sure thing," said Northlight Asset Management Chief Investment Officer Chris Zaccarelli.

The softer-than-expected September consumer price index report, released Friday, reinforced confidence in the likelihood of a Fed rate cut at its October meeting and potentially at its December meeting, said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.

Issuance is light this week, with $5.367 billion on tap, and it should be "easily distributed," J.P. Morgan strategists said.

"Investors were not disappointed," said John Kerschner, global head of securitized products and portfolio manager at Janus Henderson. "Inflation came in softer than expected, leading to a tepid bond market rally" and ensuring a rate cut at the upcoming Federal Open Market Committee meeting.

"We're not going to be having huge reinvestment months over the next few months, not until the beginning of the year. So we need this flow [of deals] to keep up with demand, and we expect that to continue," said Jennifer Johnston, director of municipal bonds research at Franklin Templeton.

The tax-exempt market is expected to be "biased higher" in the coming weeks and months as the expected heavy pace of issuance this month will not be as "oppressive" as feared, said Pat Luby, head of municipal strategy at CreditSights.

Prior to Dimensional's approval, only Vanguard held a patent to the ETF-as-a-share-class structure, but the patent expired in 2023.

Demand may strengthen as "investors anticipate the Federal Reserve's likely path of rate cuts, which would drive yields even lower," said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.

The new-issue calendar is at $15.637 billion and boasts four mega deals.

Earlier Thursday, the market was "chugging along, doing OK, just kind of nothing, in between slight strength to modest upticks, but the narrative changed when that bank news came out. The market really ran pretty quickly," said Chris Brigati, managing director and CIO at SWBC.

The attackers did not steal any data, but the firm had to rebuild its servers to get back into operation, said Albert Rodriguez, a manager at ImageMaster.

"In theory at least, municipal yields should be able to stabilize here; levels remain attractive for pure income buyers while more sustainable constructive fund inflows are just enough to speak for rising issuance in the absence of meaningful reinvestment," said Matt Fabian, president of Municipal Market Analytics.

"If I wanted to target municipal finance, this would be a really good place for me to start," said Omid Rahmani, public finance cybersecurity lead at Fitch Ratings.

As the technical picture tends to turn "more favorable" during November and December, Birch Creek strategists believe "the wider new issue concessions brought about via the heavy new issue calendar will likely be rewarded."

The average weekly issuance is at least $10 billion, said John Flahive, head of investment solutions and co-head of municipal bonds at Insight Investment.

Municipals are impacted by fluctuating supply and demand influences more than most other markets, said Jeff Timlin, a partner at Sage Advisory.

The large issuance of munis this year, up 12.9% year-to-date, "disadvantaged" the asset class compared to other U.S. fixed income assets for a majority of 2025, said Pat Haskell, head of the municipal bond group at BlackRock.