Majority of muni shops expect 2026 to be third record year in a row
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Multiple factors, such as interest rates and macroeconomic policy, will influence 2026 bond issuance, but continued infrastructure needs and inflation-induced added costs will impact government borrowing the most, analysts said.
Municipal bond supply projections for next year range from a high of $750-plus billion to a low of $520 billion, with most firms expecting issuance next year to be at least $600 billion, easily surpassing 2025’s record.
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Issuance is at $544.967B billion year-to-date, having already topped 2024’s record $507.585 billion by mid-November.
On the high end of 2026 predictions is investor and market strategist James Pruskowski’s more than $750 billion. Issuance will be driven by “mega-infrastructure, housing, climate projects, with new data centers and their supporting infrastructure adding fuel,” according to Pruskowski.
Traditional general obligation bonds will “fade,” as project-specific financings, tax increment financings and special assessments “push the limits” of market absorption, he said.
While headlines will “rattle consensus,” the real story for next year will be about what’s traditional muni supply, Pruskowski said.
Janney sees issuance between $605 billion and $650 billion, said Alice Cheng, director of municipal credit and investor strategy at the firm.
New-money issuance will tick up next year by $20 billion to $30 billion, partially due to the estimated loss of federal grants to states and local governments, along with higher construction costs, she said.
Refundings will also be up next year, as lower and more favorable interest rates will create more refunding opportunities, Cheng said.
BofA Securities sees issuance next year at $640 billion, up 10% from its 2025 projected issuance of $580 billion.
There will be lighter issuance for the first and last two months of the year and over $50 billion of supply per month from March 2026 through October 2026, BofA strategists predict.
New-money will be at $470 billion, up 8% year-over-year, driven by “the depletion of federal COVID stimulus funding; an insatiable demand for public infrastructure; a booming economy and labor market; and sticky inflation,” which pushes the “nominal dollar amount of financing for an infrastructure project significantly higher than it would have been back in 2020 and 2021,” they said.
There will be a “resurgence” in refunding activity, forecast at $170 billion, up 17% from 2025, BofA strategists said.
“The pool of refundable candidates for 2026 is roughly 13% larger than for 2025, but the backlog of bonds that are eligible for refunding and remain unrefunded is 24% larger than the backlog for 2025; and … average muni rates during 2026 will be significantly lower than during 2025, thus supporting a better refunding environment,” they said.
Furthermore, following “two years of strong new money growth and expanded net debt loads, issuers will likely spend more time executing refundings than in the past four years when muni rates turn significantly lower,” BofA strategists said.
There will be $565 billion of tax-exempt bonds, $50 billion of taxable bonds and AMT bonds, they said.
Taxable issuance could receive a “boost if there is a period of flight-to-quality trades to Treasuries, either due to risk asset declines or credit concerns; that situation is unlikely in 1H26, though the risk may increase during 2H26,” BofA strategists said.
Morgan Stanley predicts supply will fall between $600 billion and $625 billion.
There will be “bonds to buy” because costs have risen. The upside of inflation, though, is that governments have more tax dollars to spend, the firm said.
Municipal Market Analytics believes volume will be at least $600 billion.
New-money issuance will continue to grow — though at a slower pace than this year — due to “deferred maintenance, the scheduling of pandemic-delayed traditional projects, M&A activity across enterprises and governments, climate change adaptation, and the withdrawal of federal support for baseline state and local policy delivery,” said Matt Fabian, president of MMA.
Additionally, if inflation remains elevated, project costs will increase faster than available revenues, leading to more borrowing, while the potential volatility of the November mid-terms may cause state and local governments to get ahead of that by front-loading issuance next year and/or accelerating 2027 issues into 2026, he said.
For refundings, the baseline assumption is that “a newly appointed [Federal Reserve] chair spearheads more aggressive rate cutting even as inflation remains elevated or rises. The former would allow more current call activity, especially if borrowers assume (not unreasonably) that materially lower rates could be very temporary,” Fabian said.
It’s also possible that governments again “look to reschedule near-term bond maturities to improve cash flow flexibility,” he said.
CreditSights sees volume at $600 billion next year, up 5% from 2025’s expected total.
New money borrowing will increase by 10% to about $385 billion, though the actual figure could be higher, “given the recent surge in borrowing for energy pre-pay bonds and the nation’s needed investment in power generation,” said Pat Luby, head of municipal strategy at CreditSights.
Refunding activity will also grow, “fueled in part by a desire to refinance the $135 billion of bonds with coupon rates of 5% or higher that will become callable in 2026,” he said.
Ramirez also predicts supply will be at $600 billion, up 4% year-over-year, as “positive net supply at $100-plus billion could provide a headwind for total returns vs. Treasuries, similar to 2025,” said Peter Block, managing director of credit strategy at the firm.
J.P. Morgan anticipates another year of record supply with a total gross supply of $600 billion — $545 billion of tax-exempt and $55 billion of taxable/muni corporate CUSIPs — up 7% from the expected 2025 volume of $560 billion, said strategists led by Peter DeGroot.
Next year, new-money tax-exempt issuance is estimated at $420 billion, driven by expanding infrastructure needs and rising costs for construction, maintenance, and new development, they said.
The muni market will also see a “growing share of volume in the infrastructure space related to data center load demand from the AI boom,” J.P. Morgan strategists said.
Tax-exempt refunding volume is expected to reach $125 billion, they said.
“This increase is not driven by a higher likelihood of bonds being called, as we do not anticipate lower yields in the intermediate or long end of the curve. Rather, it reflects a larger pool of refunding candidates,” J.P. Morgan strategists said.
If rates decline significantly, refunding supply could exceed current projections, they noted.
SWBC sees supply between $580 billion and $600 billion for next year.
Part of the rise in issuance this year was inflation and higher construction and project costs and these factors will carry over into 2026, said Chris Brigati, managing director and CIO at SWBC.
Additionally, supply will rise because ongoing infrastructure needs must be met, he said.
Volume could exceed $600 billion if the economy improves. Positive gross domestic product growth could spur the “consumer side of the equation,” Brigati said.
The Bond Buyer’s market intelligence strategist Jeff Lipton predicts issuance will fall between $570 billion and $590 billion.
The higher year-over-year volume is “supported by a moderate decline in anticipated inflation, a lower rate environment, higher 2016 issuance over 2015 issuance (which provides indications for current refunding activity in the forecast year), previously approved bond ballots, the pipeline of critically needed ‘bedrock’ financing, and credit and overall economic conditions,” he said.
New-money and refunding issuance will rise, given the rate environment and the universe of refundable candidates, Lipton said.
With lower rates, elevated taxable advance refundings are expected, he said.
Meanwhile, policy-driven volatility will likely be “tempered” next year before the November mid-terms, and Lipton believes issuance is more likely to be front-loaded in the first half of the year.
FHN Financial sees issuance essentially flat next year at a forecasted $570 billion, said strategists Abby Urtz and Ryan Henry.
Most of the surge of recent issuance has come from new projects and has been driven by “strong credit conditions, pent-up demand after years of deferring projects, and the spend down of stimulus funds that had supported infrastructure investment up until 2024,” they said.
The impact of the conditions, though, is “fading,” indicating that new money could fall in 2026, which FHN predicts will decrease 7% to $399 billion.
Refundings, though, are expected to rise 16% year-over-year to $171 billion, Urtz and Henry said.
“With tax-exempt advance refundings still off the table and rates still too high to bring much taxable advance refunding supply, most of 2026 refinancing activity will continue to come from current refundings,” they said. “With candidates up 13% over this year and a forecast for a gradual bull steepening in the curve, we are likely to see a meaningful uptick in refunding activity.”
On the lower end, HilltopSecurities sees $555 billion in issuance: $440 billion in new-money issuance and $115 billion in refundings.
“We would be very surprised to see market activity leap meaningfully over $600 billion,” said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities, noting “none of the signposts we watch — credit conditions, budget flexibility, economic momentum — are pointing to another increase, much less a surge.”
“Balance sheets need to stabilize before issuers can shoulder more fixed costs at a higher level,” he said.
Next year seems to be one where volume eases somewhat while “staying strong” compared to long-term experience, he said.
“Several pressures are nudging issuers to slow the pace rather than add new fixed costs to their balance sheets: the ‘sugar rush’ is over, policy risk pulled transactions forward, credit quality is normalizing, rising budget pressures, economy deceleration, stable refunding activity; and inflation, labor costs and lower federal aid are pressuring budgets,” Kozlik said.
Barclays expects supply of $520 billion to $530 billion, which would result in yet another year of healthy net issuance of $190 billion to $200 billion, said strategists led by Mikhail Foux.
Trends from 2025 will continue next year: “2025’s record supply has been driven mostly by new money; refunding activity has not increased that much despite slightly lower rates, while BAB refundings were also slowing until recently and the share of refundings has declined slightly,” they said.
Rates, which are expected to “marginally” decline next year, are the big unknown, Barclays strategists said.
There will be $360 billion of new-money and $165 billion of refundings in 2026, they said.
“If rates do decline marginally, we would expect refundings to increase slightly compared with 2025, with new money supply taking a small step back since the record high activity this year has likely partially pre-funded issuer needs for 2026,” Barclays strategists said.
New-money could be negatively impacted. The “amount of bond proposals on ballots passed in early November was the smallest in recent history,” they said.
Taxable issuance is expected to be similar to this year’s figure of $35 billion to $40 billion, and $10 billion to $15 billion of corporate CUSIP issuance is expected, Barclays strategists said.
