Primary market municipal bond supply remained robust in May, even as it fell year-over-year, as inflation contributes to rising project costs and larger deal sizes.
Issuance was $51.159 billion in 876 deals, down 3.8% year-over-year from $53.164 billion across 1,033 transactions.
Supply year-to-date is at $235.028 billion, up 4.3% year-over-year.
While issuance was down in May year-over-year, it follows a robust year of issuance, and May 2026 is the second time issuance for the month has topped $50 billion, trailing only the 2025 record.
That puts May issuance well above the 10-year average of $38.848 billion.
There was a bit of a quieter period as the market headed into April, so May served as a "catch-up" for issuers looking to bring deals to market, said Chris Brigati, managing director and chief investment officer at SWBC.
While the interest rate environment was not "particularly compelling" relative to where the market has been as of late, demand was still there and solid, he noted.
The demand side of the equation helped justify bringing deals because the ratios are attractive for issuers, and they can come into the market on a relative basis, at least with good levels, if not an absolute basis, according to Brigati.
May supply was affected by the same factors that have driven surging issuance over the past year and a half, said Samantha Costanzo, head of public finance at Huntington.
There is "pent-up demand for capital projects, and combined with aging infrastructure, combined with inflation on project costs, all of these things need to get done," she noted.
Inflation, specifically, is putting pressure on many things for issuer officials, who have to think about purchasing, which, in turn, strains their budgets, Costanzo said.
"I don't think that investors are viewing any of it yet as a wholesale credit event, but if all of these things persist and prices continue to increase across the board, then we could begin to see [investors] become a little more selective about the types of issuers they want to invest in," she noted.
As a result of inflation, deal sizes have increased. For example, a $100 million deal 10 years ago would probably be north of $120 million due to the rising cost of doing the same infrastructure, Brigati said.
"Whether it's creating a new building or a school or a new bridge project to repair, it's that much more expensive to undertake, and therefore it means they have to borrow more," he said.
There hasn't been anything from the war in the Middle East that has created a setback
for issuance in May, as issuers have continued to "plow ahead" and come in a relatively strong setting, Brigati said.
At some point, though, issuers may be impacted by the war. It has already led to increased inflation, which could mean higher costs for issuers to get deals done, Costanzo said.
May details
Tax-exempt issuance ticked up 0.6% to $46.736 billion in 765 issues from $46.443 billion in 893 issues a year ago. Taxable issuance fell 47% to $2.335 billion in 95 issues from $4.407 billion in 118 issues in 2025. AMT issuance was $2.089 billion, down 9.7% from $2.314 billion in May 2025.
New-money issuance rose to $32.545 billion from $43.847 billion, down 25.8%, while refundings rose 96% to $7.728 billion from $3.942 billion.
Revenue bond issuance ticked down 1% to $34.744 billion from $35.097 billion in May 2025, and general obligation bond sales decreased 9.1% to $16.416 billion from $18.067 billion in 2025.
Negotiated deal volume was essentially flat, down only 0.1% to $42.395 billion from $42.452 billion a year prior. Competitive sales rose 1.5% to $8.699 billion from $8.568 billion in 2025.
Deals wrapped with bond insurance decreased 29.9% to $4.289 billion from $6.116 billion.
Bank-qualified issuance was down 12.5% to $737.4 million in 195 deals from $842.8 million in 230 deals a year prior.
California claimed the top spot year-to-date among states.
Issuers in the Golden State accounted for $34.263 billion, down 6.1% year-over-year. Texas was second with $28.177 billion, up 27.9%. New York was third with $23.725 billion, down 14.6%, followed by Massachusetts in fourth with $9.447 billion, up 33.8%, and Pennsylvania in fifth with $8.891 billion, a 50.1% increase from the same period in 2025.
Rounding out the top 10: Florida with $7.994 billion, down 2.7%; Illinois with $7.201 billion, up 33.6%; Michigan with $6.627 billion, up 19.9%; Alabama with $6.474 billion, up 52.6%; and Wisconsin with $5.861billion, down 1.9%.
