Markets

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

State tax policy is playing a role in the location of data centers which have turned into a lightning rod attracting debt financing, local opposition, and federal involvement.

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.

The Equitable School Revolving Fund, which has more deals in the works, has maintained its strong credit profile even as the sector has experienced headwinds.

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

The House Finance Committee is making good on a promise to address housing affordability by advancing a bill that increases the public welfare investment cap to 20% from 15%.

Two student housing developments in Orlando and Tampa, Florida, financed by speculative-grade bonds in 2024, have shown signs of strain.