(Bloomberg) — Strategists at the municipal bond market’s largest underwriters are predicting a very busy year for state and local government bond bankers.
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Bank of America Corp. analysts led by Yingchen Li and Ian Rogo say they expect state and local governments to sell a record $520 billion in government debt in 2025. the group said in a research note on Friday. The strategists also revised their forecast for this year to $460 billion from $400 billion.
“Positive factors for Muni remain in place,” they said, citing a “well-managed Muni/Treasury ratio and compressed Muni credit spread.”
This is despite expected market volatility due to economic indicators and the US election.
“Labor market strength and September's not-so-favorable inflation readings continue to influence bond market appreciation,” the strategists said in a note. “The volatile interest rate environment could continue until the end of the month.”
So far this year, issuance is up 43% from a year ago to $409 billion, according to data compiled by Bloomberg. If bond sales exceed $500 billion in 2025, it would be the first time since at least 2013.
BofA expects principal redemptions to be $480 billion and coupon payments to be $160 billion next year.
–With assistance from Amanda Albright.
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