Analysts expect pockets of credit deterioration in 2024
2 min read
Muni market participants and analysts expect certain sectors and subsectors to experience credit weakness and the U.S. presidential elections and federal policy potentially having major impacts on the municipal market this year.
The Bond Buyer released survey results in a report titled, “
The analysts were generally mildly optimistic. Compared to the $380 billion issued in 2023, Hallacy predicted a $390 billion total in 2024, plus or minus $10 billion.
“Volume will probably creep ahead of last year — particularly in the latter part of the year because there will be a greater need to issue debt as the benefits of COVID funds go further in the rear-view mirror,” Mousseau said.
Kozlik said he has become more optimistic recently and now believes there will be $420 billion in issuance.
Stiehl noted, voters approved $110 billion of new issues last year, “which is high for a non-general election year and shows that public support for bond-funded infrastructure investments remains high.”
“We anticipate that will translate into more new-money supply and bring total volume above 2023 levels,” she said, adding she also believes refundings will rise.
In The Bond Buyer’s survey, the impact of this November’s federal elections was the third biggest concern for the coming year. Several market analysts also highlighted the importance of the federal election and policy.
“If the presidential candidates change tax policy or treat municipals differently, we could have upset in the markets,” Hallacy said.
Over the last 15 years the federal government has passed several laws and budgets with profound impacts on the market, according to Kozlik. The coming election could have a “very important” impact on munis for the next several years.
The federal debt to U.S. gross national product ratio is “very high,” he said, and the federal government might start to act on deficit reduction. In that context, he believes
About two-thirds of survey respondents predict a recession for 2024. Kozlik said if that happens, the federal government may not be inclined to be so generous with state and local aid as was the case in the 2020 contraction.
