Education and healthcare sectors grew the most in 2025

In a year when bond volume hit record levels, the education and healthcare sectors experienced the most vibrant growth. 

Education was up 33.8% to $150 billion and healthcare expanded 26.2% to $48.8 billion.

Overall municipal volume was up 14.1%. 

All data is from LSEG and all percentages are for changes in dollar issuance volume in 2025 compared to 2024 levels. 

The sectors with the largest issuance were education, general purpose ($132.3 billion) and transportation ($75.9 billion). 

This past year, "healthcare and education issuers were particularly concerned about talk in Washington of ending the tax-exemption for municipal bonds," said Peter DeGroot, managing director of municipal bond strategy at J.P. Morgan. "Since they were not state or local government issuers, they thought it more likely any end to the tax exemption would hit them rather than hit other muni issuers. So they started the process of approving the bonds in the first half of the year before the One Big Beautiful Bill Act was passed. 

"Once it passed without ending the exemption, it was easier for the issuers to bring the issuance to the market," DeGroot said. 

"We see the key drivers of higher education supply in 2025 as (i) addressing large and growing deferred maintenance backlogs and capital needs, (ii) liquidity borrowings to ensure sufficient reserves to withstand anticipated reductions in federal funding, and (iii) pre-emptive borrowing in the first half of the year to address uncertainty around the continuation of the tax-exemption," Giles Nicholson, head of the Quantitative Solutions Group at Siebert Williams Shank & Co., wrote in an email. 

"Education continues to be driven by population growth in the Sunbelt," said John Hallacy, president of John Hallacy Consulting, LLC. 

"Healthcare increased due to more consolidation and to the growing realization that the reimbursement climate is going to get much worse in the near term once all the federal changes are triggered," Hallacy said. 

The sectors that shrunk the most were environmental facilities (down 11.1%) and public facilities (down 2.6%).

Hallacy noted public facilities bonds are generally tax supported and with the strong opposition to tax increases governments, sensing an inability to raise taxes, are hesitant to issue debt.

"The transportation sector is being affected by the pending renewal of the highway bill," Hallacy said. "The administration has threatened withholding funds for select projects on an almost random basis."

He added, "Republican administrations have never been strong supporters of mass transit."

Within education, the K-12 subsector was up even more, 37.2%.

Nicholson said, "K-12 borrowing outpaced higher education on account of (i) the expiration of temporary federal relief funding, (ii) increases in construction costs requiring larger issuances to provide the same physical asset value (iii) higher real estate valuations on a rolling multi-year basis, allowing for increased tax support for local bond issues, (iv) significant cumulative post-pandemic population growth in select suburban Sunbelt locations."

Within electric power, issuance from local authorities was up 48.8%. "Smaller projects are in vogue for distribution improvements and boosts to existing plants," Hallacy explained.

In the transportation sector, the seaport subsector was down 35.1%; the tollroads, highways, and streets subsector was up 23.1% and mass transportation was down 28.1%.  

"Trade is declining due to the tariffs and it is not a good time to finance a seaport when traffic is declining," Hallacy said. 

Roads "were up 23% because there has been high inflation in the subsector," DeGroot said. "High costs have led issuers to seek more money in bonds. Further, toll road bonds have been reliable and so investors have been amenable to investing in them."

Though the environment sector was down 11.1%, solid waste disposal was up 54.7%. Hallacy said the increase in the subsector was likely due to landfills nearing the end of their useful lives. 

Also within the environment sector, variable rate long put or no put was up 217.2% and from five issues to 12. "Variable rate is becoming more popular again," Hallacy said. "As one contemplates more Federal Reserve easing, costs are anticipated to decline more quickly in floating mode."

The healthcare sector had particularly strong 46.5% growth in the fourth quarter. "There is a fear that healthcare institutions are going to be facing some major financial changes due to the One Big Beautiful Bill Act," Hallacy said. "Why not finance when rates are relatively low and there is need before all of the changes that will serve to hinder activity."

Within the healthcare sector single-specialty hospitals grew 314.6%, general medical grew 108.8% and continuing care grew 102.2%. "The bottom line on specialty procedures is much higher at specialty hospitals than for more routine procedures at a general hospital," Hallacy explained.