Finance

The muni bond market stands at an "inflection point," said Nuveen strategists in a 2026 market outlook.

"A stagnant yield curve is resulting from supply having wound down and munis drawing steadiness from a likewise calm UST market," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

Moody's Ratings upgraded the Chicago Transit Authority to Aa3 from A1 Friday, and upgraded the Chicago-area Regional Transportation Authority to Aa2 from Aa3.

It was a "confusing, volatile year, and the states face growing threats in 2026 and thereafter," said Matt Fabian, president of Municipal Market Analytics.

Unless there is a massive selloff in the next two weeks, there will not be a major spike in market participants using tax-loss harvesting through year-end, said Ben Barber, director of municipal bonds at Franklin Templeton.

Following the September/October rally, munis have been relatively steady in November and December, with direction and magnitude of rate change in the UST market driving underperformance or outperformance, said J.P. Morgan strategists led by Peter DeGroot.

The dramatic downgrade projects a default by January 2027 on bonds issued to finance the Miami-to-Orlando passenger train service.

Supply for the final two weeks of the year will be virtually nonexistent, with only one deal, $24.46 million of taxable multi-family/project bonds from the Colorado Housing and Finance Authority, on the calendar for next week.

Muni yields were bumped a basis point, while UST yields fell two to four basis points.

"Once this week is done, that's it for the year. The following week is Christmas, and then after that, the new year," said Jeff Timlin, a partner at Sage Advisory.

Palomar Health's bond rating remains stuck at junk, but UCSD partnership offers a glimmer of hope.

The company has the option to defer interest payments three times without triggering a formal default.

Inflation reports may drive markets in 2026 since the labor market is "sending mixed messages," said Kevin O'Neil, associate portfolio manager and senior research analyst at Brandywine Global.

Next year, the "muni market could see stable to improving returns depending on yield curve positioning, with better performance possible at the long end of the curve," said Jonathan Rocafort, managing director and head of fixed income solutions at Parametric.

The New York City Transitional Finance Authority leads the new-issue calendar with $2 billion of future tax-secured subordinate refunding bonds.

The well-regarded pediatric hospital system is not alone in facing downgrades amid the myriad challenges healthcare has experienced in recent years.

Kansas City Federal Reserve President Jeffrey Schmid and Chicago Fed President Austan Goolsbee said in statements Friday that their dissents from this week's interest rate decision were spurred by inflation concerns and a lack of sufficient economic data.

Both Janney and Huntington are among the top 30 underwriters in the muni market and are neck in neck.

"With its third straight rate cut, the Fed is sending a clear message: it's no longer just watching inflation — it's managing risk," said Gina Bolvin, president of Bolvin Wealth Management Group.

Muni yields were little changed, and have barely moved over the past several trading sessions, said Kim Olsan, senior fixed income portfolio manager at NewSquare.