May municipal bond issuance rose year-over-year as the market recovered from April's tariff-induced volatility and threats to prestigious universities from the Trump administration prompted them to rush to the capital market.
May's volume was $49.888 billion in 955 issues, up 3.6% from $48.177 billion in 969 issues in the same period in 2024, according to LSEG data.
Issuance year-to-date is at $221.234 billion, up 12.6% year-over-year.
Some of the rise in issuance in May stemmed from the recovery of the muni market after the extreme volatility in April due to President Donald Trump's
April saw volatile conditions, driven by trade policies, uncertainty and rate cut expectations, but improved clarity in May brought more issuance activity month-over-month, said Alice Cheng, director of municipal credit and investor strategy at Janney.
Even with May seeing less volatility than April, more uncertainty could be on the horizon.
This led some issuers to also rush to the market in May, trying to get ahead of future volatility because the "only certainty we have is uncertainty," Cheng said.
In May, the education sector saw $18.771 billion of issuance, up 22.7% year-over-year.
Part of this increase stemmed from the influx of deals from prestigious and well-known universities, which have tapped the capital markets over several months amid the Trump administration's funding freezes and slashed research budgets.
"Due to what's going on in Washington, [elite universities] are issuing more than they typically have been to get in front" of policy changes, like budget cuts and pulled funding, by building up their reserves, Farrington said.
This influx from the higher education sector "props up" the monthly figure because universities are positioned to handle any policy changes going forward, Cheng said.
Supply is expected to continue at its robust pace through the start of summer, as the first week of June boasts almost $17 billion in issuance — the largest weekly figure this year and one of the top weekly figures on record.
For the year, there will be "material" issuance through the rest of 2025, but it won't be so much that the market can't handle it, said Nick Venditti, head of municipal fixed income at Allspring.
"Demand is going to rise to meet supply, given where absolute valuations are, given that relative valuations are a lot more attractive than they were even just a few weeks ago," he said.
May issuance details
Tax-exempt issuance in May rose 9.2% to $44.787 billion in 828 issues from $41.028 billion in 836 issues a year ago. Taxable issuance dropped 39.7% to $3.039 billion in 107 issues from $5.039 billion in 123 issues in 2024. AMT issuance was $2.062 billion, down 2.3% from $2.11 billion in 2024.
New-money issuance rose 21.7% to $41.173 billion from $33.821 billion, while refundings dropped 43.6% to $3.535 billion from $6.263 billion.
Revenue bond issuance increased 4.2% to $33.121 billion from $31.774 billion in May 2024, and general obligation bond sales rose 2.2% to $16.767 billion from $16.402 billion in 2024.
Negotiated deal volume was up 5.3% to $41.151 billion from $39.08 billion a year prior. Competitive sales rose 11.6% to $8.231 billion from $7.373 billion in 2024.
Bond insurance rose 47.2% to $6.286 billion from $4.27 billion.
Bank-qualified issuance dropped 14.8% to $811.7 million in 218 deals from $953.2 million in 262 deals a year prior.
California claimed the top spot year-to-date among states.
Issuers in the Golden State accounted for $36.389 billion, up 15.9% year-over-year. New York was second with $27.529 billion, up 17.5%. Texas was third with $21.713 billion, down 16.5%, followed by Florida in fourth with $8.14 billion, down 27.6%, and Massachusetts in fifth with $7.035 billion, a 0.9% increase from 2024.
Rounding out the top 10: Colorado with $6.873 billion, up 85.4%; Pennsylvania with $5.897 billion, up 30.7%; Ohio with $5.836 billion, up 74.6%; Wisconsin with $5.754 billion, up 28.8%; and Washington with $5.591 billion, down 0.7%.
