March bond volume rose year-over-year as a lack of federal funding, higher costs and rich valuations led issuers to come to market despite the ongoing volatility amid the war in the Middle East.
Issuance was $50.081 billion in 697 issues, up 17.3% year-over-year from $42.709 billion across 726 transactions.
Supply year-to-date is at $126.762 billion, up 6% year-over-year.
In March, financial markets were roiled by rising oil prices, growing inflation concerns and continued volatility amid the war with Iran.
This led to some tranches being pulled, like a tax-exempt portion of Chicago's $800 million deal; deals being postponed outright, such as the Bay Area Toll Authority's $232.48 million deal; or downsized transactions like New York City's $2.3 billion general obligation bond deal.
However, even with this, issuance for March was still the largest monthly supply figure on record.
"March [being] a big month of issuance doesn't surprise me. What surprises me, though, is that even though the level of volatility in the financial markets was the highest we've seen in some time, issuers still felt compelled and or comfortable enough to go ahead and price that heavy level of insurance," said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.
This was a "meaningful" March, he said, especially as interest rates rose significantly in a few weeks, but it remained a very heavy month for supply.
Part of the increase year-over-year came from themes seen in previous months: There is less federal-backed funding; states and local governments have to build infrastructure, which has been underinvested in; and higher construction costs, which are up 40% since COVID, said Shannon Rinehart, senior portfolio manager of municipal debt at Columbia Threadneedle Investments.
Furthermore, some issuance may have been pulled forward in March as the next two to three weeks supply may be taking a "breather," particularly on the high-yield side, she said.
"Issuers were keen to take advantage of some pretty rich valuations in the muni market and push forward that supply into a pretty heavy reinvestment demand. It is constructive for our market that as we continue into this lesser reinvestment period, we are seeing issuance slow down a little bit, too," Rinehart said.
Among sectors, issuance for education was the second highest total at $12.73 billion, up 9.3% from $11.65 billion in March 2025.
Nearly two-thirds of the total came from school districts/board of education issuance, which rose 23.4% to $8.273 billion from $6.702 billion in March 2025, according to LSEG.
This rise in issuance for school districts/board of education comes from a few factors: federal funding for schools expiring, increased costs, and state budget concerns, said Chris Lanouette, a portfolio manager at CIBC.
"All those kind of conspired to the potential for an increase in school district issuance going forward," he noted.
New-money and refunding issuance have been "disappointing" year-to-date, with both seeing slower growth than BofA strategists expected.
The firm expected new-money issuance to grow 8% year-over-year and refundings to rise 17% in 2026. During the first quarter, new-money is up 6.4% and refundings have increased 16%, according to LSEG.
This has led the firm to revise its 2026 forecast downward to $600 billion from $640 billion.
J.P. Morgan, meanwhile, has maintained its $600 billion forecast.
"While we acknowledge that the current market dislocation is likely to place some downward pressure on issuance while it persists, we believe it is premature to revise our forecast given the inherently unknowable nature of both the duration and resolution of the ongoing conflict," J.P. Morgan strategists led by Peter DeGroot said in a Friday report.
However, the conflict in the Middle East, which continues to impact financial markets, will likely have little impact on total supply this year, Lanouette said.
Issuers still need to raise funds for deferred maintenance, and it will be "business as usual" from a issuance standpoint, he said.
March details
Tax-exempt issuance rose 20.5% to $46.652 billion in 642 issues from $38.719 billion in 658 issues a year ago. Taxable issuance rose 3.5% to $2.39 billion in 46 issues from $2.309 billion in 61 issues in 2025. AMT issuance was $1.04 billion, down 38.2% from $1.681 billion in March 2025.
New-money issuance rose to $36.044 billion from $33.11 billion, up 8.9%, while refundings rose 24.3% to $5.695 billion from $4.581 billion.
Revenue bond issuance grew 9.3% to $30.805 billion from $28.185 billion in March 2025, and general obligation bond sales increased 32.7% to $19.276 billion from $14.524 billion in 2025.
Negotiated deal volume was up 37.6% to $42.127 billion from $30.616 billion a year prior. Competitive sales fell 32.3% to $7.913 billion from $11.691 billion in 2025.
Bond insurance increased 33.9% to $3.118 billion from $2.329 billion.
Bank-qualified issuance was down 15.3% to $563.5 million in 133 deals from $664.9 million in 156 deals a year prior.
California claimed the top spot year-to-date among states.
Issuers in the Golden State accounted for $20.185 billion, up 6.1% year-over-year. Texas was second with $16.371 billion, up 30.4%. New York was third with $14.231 billion, ticking down 0.6%, followed by Pennsylvania in fourth with $6.397 billion, up 51.3%, and Florida in fifth with $5.063 billion, a 13.5% decrease from the same period in 2025.
Rounding out the top 10: Illinois with $4.732 billion, up 56.3%; Alabama with $4.571 billion, up 14.6%; Tennessee with $3.87 billion, up 944.6%; Wisconsin with $3.819 billion, down 15.4%; and Massachusetts with $3.477 billion, down 11.5%.
