February bond issuance was basically flat compared to the same month in 2025, as continued infrastructure needs and soaring costs kept supply on pace with last year.
Issuance was $40.336 billion in 632 issues, down only 1.1% year-over-year from $40.772 billion across 731 transactions. This is the third-highest issuance figure for the month of February.
Supply year-to-date is at $74.644 billion, down 10.6% year-over-year.
"Prolific issuance in the municipal market, a major theme in 2025 and to start 2026, continued in February as growing capital requirements for municipal infrastructure drove an influx of borrowers to the new-issue market," said Bob Lind, co-founder of Lind Capital Markets.
Part of the elevated issuance is the backlog of projects and much-needed infrastructure upgrades that have been piling up since the pandemic, as municipalities and potentially authorities have not kept up with the work as they should have, said Oana Bandar, a trader at Appleton Partners.
"That certainly is weighing in on decision makers' minds as rates are still very low, and it makes sense to fund projects at these levels," she said.
These projects are now more expensive to fund due to rising costs and inflation, both of which have been "part of the recipe for increased issuance," said Jeremy Holtz, portfolio manager at Income Research + Management.
For example, if it used to cost issuers $100 million to do something, now it could cost $140 million to upgrade or put forward a project, he said.
The increased issuance is the result of a mix of larger deals as well as more issuers, including some new ones and those that have not issued in years, coming to market, he said.
New-money continues to outpace refundings, Holtz said.
"The more outstanding bonds you have, the greater absolute dollar value of issuance you're going to see with refundings, but the main driver of issuance continues to be infrastructure needs," which means more new-money issuance, he said.
Demand for the deals in February is "huge," as it has been pent up for several months, and "it concludes in very strong levels for these deals and good subscription levels," Bandar said.
Holtz concurred, saying there has been an "enormous" amount of demand, with "muted rate fall" in the Treasury market helping keep demand steady.
"All these markets are tied together, but in a vacuum, on its own, heavy muni supply always has the potential in the very short term to disrupt the municipal market and push yields higher," he said.
There remains a supply/demand imbalance in the market, with demand outweighing supply, even with $500-plus billion of supply, Holtz said.
There is a lot of demand to "soak up" that issuance and the first two months of 2026 are supportive of that argument, he said.
February details
Tax-exempt issuance rose 8.4% to $37.671 billion in 566 issues from $34.762 billion in 649 issues a year ago. Taxable issuance dropped 32.5% to $1.836 billion in 61 issues from $2.721 billion in 76 issues in 2025. AMT issuance was $827.9 million, down 74.8% from $3.289 billion in February 2025.
New-money issuance barely budged to $29.418 billion from $29.545 billion, down 0.4%, while refundings rose 36.6% to $6.538 billion from $4.786 billion.
Revenue bond issuance fell 9.4% to $24.836 billion from $27.403 billion in February 2025, and general obligation bond sales increased 15.9% to $15.5 billion from $13.369 billion in 2025.
Negotiated deal volume was down 5.8% to $31.095 billion from $33.025 billion a year prior. Competitive sales rose 29.2% to $9.226 billion from $7.138 billion in 2025.
Bond insurance increased 26.1% to $2.667 billion from $2.114 billion.
Bank-qualified issuance was down 28.8% to $478.2 million in 111 deals from $671.4 million in 168 deals a year prior.
California claimed the top spot year-to-date among states.
Issuers in the Golden State accounted for $10.487 billion, down 7.4% year-over-year. Texas was second with $9.306 billion, down 1.6%. New York was third with $6.804 billion, up 18.8%, followed by Pennsylvania in fourth with $3.658 billion, up 45.1%, and Florida in fifth with $3.464 billion, a 32.4% decrease from the same period in 2025.
Rounding out the top 10: Tennessee with $2.993 billion, up 1,535.3%; Alabama with $2.926 billion, down 1.6%; Wisconsin with $2.865 billion, up 34.7%; Illinois with $2.562 billion, up 65.8%; and Massachusetts with $2.373 billion, up 3.4%.
