Primary bond market

Following this week, the pace of issuance should pick up, Birch Creek strategists said.

Underwriting spreads rose to $4.30 in 2025 from $4.23 in 2024.

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.

"Unsurprisingly, the market is taking these numbers in stride, with the bond market only slightly higher after a large rally over the last couple of days due to the equity market sell-off," said John Kerschner, global head of securitized products and portfolio manager at Janus Henderson Investors.

A California Department of Water Resources issuance, based on a resolution extending contracts with water agency customers, drew strong demand.

Currently, munis are largely operating "in their own world" — ignoring rich valuations and upcoming supply, said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital, in a report.

"The bond market marked down the odds of rate cuts after the release," said FHN Financial Chief Economist Chris Low. "The fact long yields are still lower than two days ago suggests traders are skeptical of the quality of the employment data but are confident the Fed will use it as a reason to keep rates steady," he said.

The health system plans to price $162 million on Feb. 18 and could sell up to $425 million this year.

The state sold the debt in a competitive auction Tuesday morning, with interest rates landing in the low 3% to high 4% range across maturities.

Tuesday was a particularly heavy day of supply at an estimated $7.5 billion, per J.P. Morgan strategists.

The competitive bond sale comes after the triple-A-rated city received a negative outlook from S&P over the use of reserves to ease budget pressures.

The state transportation commission expects to tap into $1.5 billion of revenue bond authorization with two deals totaling $350 million this year.

This week's expected elevated $12.6 billion in supply" "coincides with a recent uptick in secondary offerings … and may skim some froth from the market, particularly where spreads have hit one-year tights," said J.P. Morgan strategists led by Peter DeGroot.

The new-issue calendar is led by Washington with $1.3 billion of GOs selling by competitive bid in three series.

Piper Sandler will price $100 million of electric revenue bonds for Iowa public utility Muscatine Power and Water on Wednesday.

Munis enter this year with "strong credit fundamentals, elevated tax-equivalent yields, and a steeper curve that supports duration extension," said James Welch, municipal portfolio manager at Principal Asset Management.

Proceeds will help finance late stages of construction of city hall.

Yields have seen "intermittent volatility from broader macro and geopolitical crosscurrents, keeping sentiment cautious despite relatively muted headline moves," said James Pruskowski, managing director at Hennion & Walsh.

While fixed-spread tenders may be a novelty for tax-exempt bonds, they have been around for over 40 years for corporate bonds.

Supply should be "well-received, given strong inflows and the increase in reinvestment capital for the new month," said Chris Brigati, managing director and CIO at SWBC, and Ryan Riffe, senior vice president of capital markets at the firm.