The municipal securities market is projected to achieve a third consecutive year of record new issue volume in 2026, following record years in 2024 and 2025. Through June 2026, new issue volume reached $299 billion, representing a 5% increase compared to the same period in 2025, with the second quarter volume being the largest on record. This trend suggests the market is poised for continued growth unless interest rates drastically increase. The majority of municipal bond firms anticipate 2026 supply to range from $520 billion to over $750 billion, reinforcing expectations for another record year.
While new-money volume in the first half of 2026 was slightly lower than in 2025, refunding volume experienced a significant surge, rising by 48%. Competitive and negotiated volumes remained consistent with 2025 levels, and private placement volume saw a slight rebound to $6 billion, an increase of 7% compared to the previous year, although still considerably lower than the $22 billion recorded in 2023. Tax-exempt issuance specifically grew by 7%, contrasting with a 2% decline in taxable issuance and a 29% decrease in AMT issuance from the first half of 2025.
Investor appetite for municipal bonds has remained strong throughout 2026, absorbing the increased issuance. This robust demand is evident across various investment vehicles, including municipal bond exchange-traded funds (ETFs), tax-exempt mutual funds, separately managed accounts, and direct individual holdings. Issuer fundamentals are healthy, supported by growing tax revenues, disciplined budgeting, substantial rainy-day reserves, and improved pension funding. Despite this strong performance, tax-equivalent yields for municipal bonds are near the top quartile, and the market generally exhibits lower volatility compared to other asset classes.
