Supply set a record in 2025 as issuance surged to more than $580 billion, driven by long-overdue and much-needed infrastructure upgrades, fears over the elimination of the tax exemption and the continued presence of mega deals.
The muni market produced $586.195 billion of debt issuance in 2025, up 14.1% from the previous record of $513.652 billion in 2024, according to LSEG data.
Going into 2025, supply projections ranged from $480 billion to $745 billion, with most firms anticipating issuance would be on pace, if not surpass, 2024's then-record total of $500 billion-plus.
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.
However, 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 — even with the short-lived tariff-induced volatility that interrupted the surging weekly issuance for two to three weeks — led firms to revise their projections upward by midyear.
"The pace of issuance picked up early in the year when tax-exemption got tossed into the mix of possible 'One Big Beautiful Bill' pay-fors and borrowers advanced hundreds of deals in order to be 'grandfathered,'" said Gayl Mileszko, senior vice president and director of credit analysis at HJ Sims. "But the threat passed, as it does during the debate on every tax bill, and it brought tax-exempt income to top of mind for many retail investors," she said.
"I don't think anybody believed [the tax exemption] would fully be eliminated. Maybe worst-case scenario was more for future debt, future tax exemptions on that might have been in jeopardy, but I think the 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.
Infrastructure investment and maintenance drove these elevated issuance levels in 2025, both of which have been affected by inflation, said PIMCO strategists in a December report.
Inflation was "perhaps the most impactful" on increased supply, said Julie Burger, managing director at Wells Fargo, noting that this contributed to larger transaction sizes despite the number of deals remaining relatively stable.
Part of the reason for the larger deals is that costs rose, Brigati said.
"Inflation has increased the need to borrow more to do the same work and run the same infrastructure," he said. "So that leads to the need to have higher borrowing."
These huge deals are healthy for the muni market overall and it's a positive when these very large "bellwether" issuers come to market, Brigati said.
Tariff-induced volatility played a small role in the pace of issuance in 2025, as several deals were shelved or moved to the day-to-day calendar during the wild yield swings in April. 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 and comes out even stronger," Olsan said.
Tax-exempt issuance increased 17.1% to $527.166 billion in 8,921 issues from $450.356 billion in 8.278 issues in 2024.
Taxable issuance fell 9.2% to $34.491 billion in 874 issues from $38.016 billion in 885 issues the previous year. Alternative minimum tax issuance dipped 2.9% to $24.537 billion from $25.28 billion.
New-money issuance rose 20.5% to $434.567 billion from $360.496 billion in 2024. Refundings were down 15.3% to $72.382 billion from $85.45 billion.
Issuance of revenue bonds increased 11.4% to $385.65 billion from $346.068 billion in 2024, and general obligation bond sales rose 19.7% to $200.545 billion from $167.585 billion in 2024.
Negotiated deal volume was up 14.8% to $470.07 billion from $409.531 billion a year prior. Competitive sales increased 17.7% to $101.577 billion from $89.3 billion in 2024.
Deals wrapped by bond insurance totaled $42.859 billion, up 4.1% from $41.154 billion.
Bank-qualified issuance ticked up 3.2% to $9.074 million in 2,199 deals from $8.795 million in 2,242 deals in 2024.
In the states, California accounted for the most volume in 2025.
Issuers in the Golden State sold $83.75 billion, a 16.4% increase year-over-year. Texas was second with $83.152 billion, up 21.9% year-over-year, and New York was third with $64.428 billion, up 9.5%. Florida came in fourth with $23.695 billion, down 14%, and Illinois rounds out the top five with $19.938 billion, a 14.3% increase from 2024.
The rest of the top 10 are: Alabama with $18.505 billion, up 35.6%; Wisconsin with $17.779 billion, up 52.6%; Massachusetts with $17.57 billion, up 20.8%; Pennsylvania at $17.2 billion, up 2.2%; and Ohio with $14.847 billion, a 58.6% increase from 2024.
