Tender activity slowed during the first half of the year as higher rates and fewer refinancing options have limited their use. Despite this, some issuers still find them helpful.
Tenders have grown in popularity over the past several years as a way to generate savings due to market changes and the elimination of tax-exempt advanced refunding under the 2017 Tax Cuts and Jobs Act.
Between 2019 and 2024, tender activity jumped, with muni issuers executing more than $48 billion, according to the Government Finance Officers Association.
But since 2024, tender activity has fallen. This year, tenders could sink to their lowest levels since 2022, and even if there's a pick-up in the second half of the year — which is possible if rates decline and volatility subsides, per Barclays strategists — it's unlikely total tendered volumes will reach the levels seen during the past two years.
Declining tender activity stems largely from higher interest rates, and a higher-for-longer interest rate environment is expected to "keep a lid" on any tender resurrection, said Jeff Lipton, market intelligence analyst at Bond Buyer.
Six or seven years ago, during the lower interest rate period, heavy refinancing and tender activity occurred as issuers aggressively moved to lower their overall cost of borrowing, he said.
However, as accelerating inflation drove up rates, the pool of refunding and tender candidates dried up significantly, Lipton said.
Despite the fall in tenders, there still remains some issuer interest.
Wells Fargo, for instance, has done several tenders this year, including recently for the state of Wisconsin, the Chicago Transit Authority, the University of Texas and TriMet, with more in the pipeline, said Julie Burger, co-head of public finance at Wells Fargo.
The biggest appeal of tenders is savings. With expectations that rates may increase going forward, greater interest in strategies to lock in savings exist, and tenders are one option, she said.
Tenders have become much more of a norm in the market, as issuers, banks and investors now understand the process, and documentation is much more streamlined, Burger said.
GFOA in June 2025 released best practices on tenders, recommending that policies and procedures be established, including guidance on defining the intended goals, selecting a financing team, calculating attributable costs, ensuring a clear understanding of fair pricing and determining goal attainment.
The current tender process, though, is long and difficult, David Erdman, managing director at Baker Tilly, said in an interview.
"You have to evaluate whether you want to pursue it. You have to determine the appropriate pricing, and then you have to go through a pretty structured period where you have to put notice out, and you don't know the results [in advance]," he said.
An issuer may be looking to take out some bonds or aim for some debt service savings, but the total they receive is subject to the acceptance of the tender offers by different investors, Erdman noted.
Tenders have around 30% to 40% success rates, with that dropping to 15% for bonds already tendered that are being tendered again.
Tenders are usually executed by larger issuers, but better data could make the process a bit quicker, allowing a mid-sized or smaller issuer to pursue a strategy it may be interested in, he said during The Bond Buyer's recent Tech Forum.
"So [then] you don't have to be a large issuer to reap the benefits from it," Erdman said.
Issuers will continue to take advantage of tenders where it makes sense, whether that's savings, restructuring, achieving some kind of consent, or other issuer goals, according to Wells Fargo's Burger.
Tenders are not most issuers' first choice of refinancing. For the San Francisco Public Utilities Commission, tenders are "an opportunistic choice," particularly when the issuer can take a taxable bond, convert it to a tax-exempt bond, achieve savings, and introduce new call optionality, said Nikolai Sklaroff, the issuer's capital finance director.
SFPUC has used the tender pool in conjunction with converting and refunding taxable bonds, which has become a very efficient way not only to produce savings but also to introduce additional call options, he said.
SFPUC has done four series of bonds as part of its two water tenders. In 2023 and 2025, it did both taxable and tax-exempt tenders, Sklaroff said.
The taxable share of tendering activity has fallen this year, reflecting both "tighter spreads and the diminishing stock of low-coupon bonds issued in 2019–2021," Barclays strategists said.
This has led to more tax-exempt tenders being issued year-to-date than taxable ones, reversing the trend of the last few years when taxable tenders were more frequent, they said.
Taxable bonds, though, are more suitable for tenders than tax-exempts, said Andrew Kalotay, president of Andrew Kalotay Associates.
"The only incentive for tax-exempt tenders is to report savings, although waiting until the call date is likely to be more economical," he said.
These savings come at a "substantial cost," including the premium paid over fair market value (2 to 4 basis points), Kalotay said.
And unlike taxable corporations, muni issuers "cannot write off (expense) the premium for tax purposes," he said.
The success rate of corporate tenders used to be around 80%, compared with around 30% for tax-exempt muni tenders, Kalotay said.
Even with the lower success rate, "tenders [will] continue to be a topic that issuers are interested in. It's not going to make sense on every transaction, and it's not going to make sense for every bond candidate, but it's a tool that issuers and the advisor community are now comfortable with when the circumstances are appropriate," Burger said.
