State and local governments have sold nearly $100 billion of MuniBonds so far this year, putting 2025 on pace to have the most new issuance ever. The pace of new issuance is running 27% higher than the pace of 2024, which set the previous annual record.
Driving the record issuance in 2024 was the November US Presidential election, and the 2025 issuance is due to the uncertainly regarding the expiration of the 2017 TCJA (Tax Cuts and Jobs Act) and what the new bill will look like when it arrives on President Trump's desk later this year.
The good news for MuniBonds investors is that this new supply is starting to overwhelm demand.
First, yields are higher as issuers needs to lower prices to attract buyers.
Secondly, long-maturity MuniBonds are at the cheapest relative value to Treasuries since 2023.
Great time to lock in 4% plus yields with 10 years of call protection.
Depending on one's marginal federal tax bracket, the investor could be seeing TEYs above 7%.
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