Issuance set records in 2025 as supply surged to nearly $580 billion, driven by long-overdue infrastructure upgrades, concerns about elimination of the tax exemption and the continued presence of mega deals.
The muni market saw a record $579.936 billion of debt issued in 2025, up 12.9% from $513.652 billion in 2024, according to LSEG data.
Tax-exempt issuance rose 16% to $522.558 billion from $450.356 billion in 2024. Taxable issuance dropped 12.4% to $33.293 billion from $38.016 billion in 2024.
Refundings were down 16.1% to $71.717 billion from $85.45 billion in 2024. New-money volume rose 19.3% to $430.069 billion from $360.516 billion in 2024.
Going into 2025,
While fears about the potential elimination of the tax exemption were a significant consideration, the predictions accounted for other factors, including growing infrastructure needs and spending, dwindling COVID-era aid, monetary and fiscal uncertainty and the general acceptance of rates staying higher for longer.
Few, though, predicted the extent of the deluge of issuance, leading to the fastest pace of supply on record and some of the largest weeks of volume ever, despite tariff-induced volatility that postponed some deals or moved them to the day-to-day calendar. Ultimately, the volatility did not hinder supply for longer than two to three weeks.
As a result, most firms
The market saw a surge in volume at the start of the year amid fears over the potential elimination of the tax exemption, leading to the acceleration of several deals.
"I don't think anybody really believed it would fully be eliminated. Maybe worst-case scenario was more future debt, future taxes on that might have been in jeopardy, but I think general consensus was that existing debt would be grandfathered," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.
Another factor was the continued need for infrastructure, with many issuers no longer able to put off much-needed projects and upgrades.
This year "made up" for the lack of any work that was being done for infrastructure needs during the COVID period, said Chris Brigati, managing director and CIO at SWBC.
"We really had a moratorium on infrastructure during that period of time and we came out of it needing to continue to build," he said.
Inflation also played a role, which was "perhaps the most impactful," said Julie Burger, managing director at Wells Fargo, noting this contributed to transaction sizes becoming larger despite the number of deals remaining relatively stable.
This year saw 45 issues of $1 billion par value or greater, Olsan said.
"Some of that is due to the fact that it's more expensive now," Brigati said. "Inflation has increased the need to borrow more to do the same work and run the same infrastructure. So that lends to the need to have higher borrowing."
These huge deals are healthy for the muni market overall and seeing these very large, "bellwether" issuers in the market when they do come is a positive, he noted.
Tariff-induced volatility played a role, as several deals were shelved or moved to the day-to-day calendar during April.
At the start of that month, MMD yields rallied 18 to 29 basis points, before selling off 85 to 98 basis points between Monday, April 7, and Wednesday, April 9, the day Trump's sweeping tariffs were set to take effect.
On April 9, Trump announced a 90-day pause on tariffs against all countries except China, which sent MMD yields rallying 45 to 48 basis points on Thursday, April 10, before selling off again on Friday, April 11, with yields cut 25 to 27 basis points.
However, the aftereffects of market volatility proved short-lived, as issuance still ticked up year-over-year in April.
"Volatility is never welcome, but the market seems to always weather it happening and comes out even stronger," Olsan said.
Heading into 2026, issuance projections range from a low of $520 billion to a high of $750-plus billion, with most firms expecting issuance next year to be at least $600 billion, easily surpassing 2025's record of nearly $580 billion.
Multiple factors, such as interest rates and macroeconomic policy, will influence next year's bond issuance, but continued infrastructure needs and inflation-induced added costs will impact government borrowing the most, analysts said.
December issuance details
December municipal bond issuance, at $40.448 billion, was up 19.6% year-over-year from $33.823 billion in 2024.
Tax-exempt issuance was up 27.5% to $36.891 billion in 616 issues from $28.931 billion in 573 issues in 2024.
Taxable issuance dropped 21.4% to $2.302 billion in 56 issues from $2.929 billion in 63 issues a year ago. Alternative minimum tax issuance fell 36.1% to $1.255 billion from $1.963 billion.
New-money issuance rose 11% to $30.902 billion from $27.829 billion last year. Refundings increased 61.2% to $7.487 billion from $4.644 billion.
Issuance of revenue bonds increased 22.6% to $31.991 billion from $26.089 billion in December 2024, and general obligation bond sales rose 9.4% to $8.458 billion from $7.734 billion in 2024.
Negotiated deal volume was up 32.9% to $36.775 billion from $27.677 billion a year prior. Competitive sales ticked down 2% to $3.39 billion from $3.461 billion in 2024.
Deals wrapped by bond insurance in December increased 33.3% to $2.34 billion in 77 deals from $1.755 billion in 89 deals a year prior.
Bank-qualified issuance dipped to $503.1 million in 126 deals from $506.7 million in 124 deals in 2024, a 0.7% decrease.
In the states, California accounted for the most volume in 2025.
Issuers in the Golden State sold $83.609 billion, a 16.2% increase year-over-year. Texas was second with $82.522 billion, up 21% year-over-year, and New York was third with $63.203 billion, up 7.4%. Florida came in fourth with $23.695 billion, down 14%, and Illinois rounds out the top five with $19.913 billion, a 14.2% increase from 2024.
The rest of the top 10 are: Alabama with $18.505 billion, up 35.6%; Wisconsin with $17.731 billion, up 52.2%; Massachusetts with $17.526 billion, up 20.5%; Pennsylvania at $17.161 billion, up 2%; and Ohio with $14.554 billion, a 55.4% increase from 2024.
