Securitization

"With decent job growth in December and a downtick in the federal funds rate, the Federal Reserve will likely hold the federal funds rate steady at [its] next decision in late January," said Comerica Bank Chief Economist Bill Adams.

Average trade size continued to decline in 2025, "consistent with a market that is becoming increasingly more electronic," the MSRB said.

Munis are off to a "hot start" this year, said Jeremy Holtz, a portfolio manager at Income Research + Management.

Surprisingly, the expected surge in net supply last year did not elicit a major repricing in the muni market, said Pat Luby, head of municipal strategy at CreditSights.

Confidence in the muni market is "well placed," said Matt Fabian, president of Municipal Market Analytics.

Improved risk sentiment after the capture of Venezuelan President Nicolás Maduro helped pull investors into all markets and munis are a "beneficiary" of that shift, said James Pruskowski, an investor and market strategist.

With the muni calendar "heating up" ahead of another projected year of record issuance, Jeff Lipton, The Bond Buyer's market intelligence strategist, expects "investor demand to comfortably digest the new supply given reinvestment needs and compelling yield and income opportunities."

Municipal bond issuers are on tap to sell about $6 billion of new issues in early January, but there should be plenty of money from maturing issues and interest payments to easily absorb that amount, as well as volume going forward, says Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

The Federal Open Market Committee meeting minutes showed the decision was closer than the vote indicated, with "a few" voters suggesting they would have supported no change at the meeting.

The muni credit market has experienced headwinds this year, including "potential federal funding cuts, the impact of tariffs and sector-specific pressures," said Goldman Sachs strategists

The muni bond market stands at an "inflection point," said Nuveen strategists in a 2026 market outlook.

"A stagnant yield curve is resulting from supply having wound down and munis drawing steadiness from a likewise calm UST market," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

It was a "confusing, volatile year, and the states face growing threats in 2026 and thereafter," said Matt Fabian, president of Municipal Market Analytics.

Unless there is a massive selloff in the next two weeks, there will not be a major spike in market participants using tax-loss harvesting through year-end, said Ben Barber, director of municipal bonds at Franklin Templeton.

Following the September/October rally, munis have been relatively steady in November and December, with direction and magnitude of rate change in the UST market driving underperformance or outperformance, said J.P. Morgan strategists led by Peter DeGroot.

The dramatic downgrade projects a default by January 2027 on bonds issued to finance the Miami-to-Orlando passenger train service.

Supply for the final two weeks of the year will be virtually nonexistent, with only one deal, $24.46 million of taxable multi-family/project bonds from the Colorado Housing and Finance Authority, on the calendar for next week.

Muni yields were bumped a basis point, while UST yields fell two to four basis points.

"Once this week is done, that's it for the year. The following week is Christmas, and then after that, the new year," said Jeff Timlin, a partner at Sage Advisory.

The company has the option to defer interest payments three times without triggering a formal default.