Thoughts from the Muni Desk

Key takeaways

Pace of growth

Muni supply is expected to remain high in 2026, but the pace of growth may slow to typical levels, creating more favorable supply/demand.

Shutdown ended

The longest US government shutdown in history ended, setting the stage for a renewed flow of macroeconomic data.

Free NYC buses

Mayor-elect Zohran Mamdani’s promise for fast and free New York City buses hasn’t won Governor Kathy Hochul’s support.

Here’s our insight and perspective on what’s happening in the muni market, including supply and demand, credit trends, and a quick look at key muni data points, in our November 20 update.

Tim: Issuers brought new deals to market in record numbers in 2024 and 2025. Do you think that’s likely to continue in 2026?

Mark: Yes, I believe the supply numbers are likely to remain elevated next year. So far this year, new issuance has already surpassed $500 billion, compared to last year’s record tax-exempt issuance of $494 billion.¹ And we still have a month left to go! You’ll remember that many state and local governments held off entering the municipal market for financing until the Federal Reserve finished raising interest rates. They also had plenty of cash on their balance sheets from pandemic-related federal funding. Now that rates are somewhat lower and federal funding has dried up, we’ve seen issuers return to the market to fund essential infrastructure projects. Inflation has driven up costs, and the deal sizes have grown to compensate. I expect more of the same next year, but the growth rate will likely slow to more typical levels.² This moderation should create a healthier technical environment for munis compared to recent years. We may even see more supportive market technicals next year, with negative net supply from larger levels of reinvestment capital. One forecast, which I believe is aggressive, estimates $640 billion of total new issuance in 2026, with $470 billion in new money and $170 billion in refundings. This projection also calls for reinvestment proceeds totaling $701 billion, with $520 billion in principal redemptions and $181 billion in coupon payments.²

Tim: The longest government shutdown in US history ended after 43 days. The national economy seems to have been resilient, but it’ll take time to assess the damage, assuming there’s any.

Mark: Yes, and munis seem to have come away from the shutdown relatively unscathed, at least as far as we can tell. At this point, we haven’t heard of any long-term repercussions for municipal credits. In fact, the muni market posted gains over the shutdown period, which had also happened in four of the previous five government shutdowns.³ After the news of the Senate-brokered deal, the muni market, like the overall financial markets, reacted positively. Now that the shutdown is over, market participants are looking forward to a heavier, albeit lumpy, macroeconomic data calendar, which should give us a more complete picture of inflation and employment data. Until recently, the only notable releases were the new weekly ADP employment data and unemployment claims.⁴ However, we’ll have to be a bit more patient for all of the economic reporting. Even though the federal government has reopened, it’ll take time for data releases to start flowing to the markets.

Tim: Following the New York City mayoral election, New York State Governor Kathy Hochul said publicly that she won’t support free bus fares.⁵

Mark: Mayor-Elect Zohran Mamdani’s campaign pledge to voters to make buses fast and free when he became mayor may have hit a roadblock. Hochul seems unlikely to go along with his plan because it would take money away from the Metropolitan Transit Authority (MTA), which relies on the farebox for part of its operating costs. Mamdani would need Hochul’s support, as well as the support of the MTA and the New York State Legislature, to fulfill his campaign promise.⁵ From where I sit, it looks like a non-starter. Let’s remember that congestion pricing was implemented in New York City to help the MTA, which is reportedly facing a $452 million shortfall.⁵ And Hochul has already said no to tax increases.⁵ We’ll keep an eye on the developments, but we don’t believe Mamdani’s mayoral term will have any adverse effects on New York City credits.

 Read the complete article, including munis by the numbers. 

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Originally Posted November 20, 2025

Thoughts from the Muni Desk by Invesco US

 Footnotes

• Source: Bloomberg News, as of Nov. 7, 2025.
• Source: Bank of America Global Research, as of Oct. 10, 2025.
• Source: Bank of America Global Research, as of Nov. 17, 2025. Municipal market returns are represented by the ICE BofA Municipal Master Index, which consists of USD-denominated, fixed-rate, tax-exempt bonds. It includes state and local general obligation bonds, revenue bonds, insured and pre-refunded bonds, and was created by ICE indices to measure the performance of the underlying interest of the US municipal market. Muni returns during government shutdowns were 0.21% (Nov. 13–19, 1995), 1.11% (Dec. 15, 1995–Jan. 6, 1996), –0.31% (Sept. 30–Nov. 17, 2013), 0.01% (Jan. 19–22, 2018), 0.46% (Dec. 21, 2018–Jan. 25, 2019), and 1.15% (Oct. 1–Nov. 12, 2025).
• Source: JP Morgan, as of Nov. 10, 2025.
• Source: CBS News, as of Nov. 10, 2025.