(Bloomberg) — The municipal bond market’s biggest underwriter is expecting even more issuance this year as state and local governments tap the market at a rapid clip.
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Strategists at Bank of America Corp. lifted their muni-bond issuance projection for 2025 to $580 billion from $520 billion, according to a research note published Friday.
The revision comes after an exceptionally strong start to muni bond sales this year, with more than $118 billion issued already, the most in at least a decade, according to data compiled by Bloomberg. Much of the growth has been in deals for infrastructure projects rather than refinancings, the strategists said.
“The growth of new financing volume has accelerated due to the strengthened financial status of issuers and the large gap of infrastructure needs,” wrote the strategists led by Yingchen Li and Ian Rogow. They noted that while issuance was slightly lower than projected in March due to a sharp rise in muni rates at the end of the month, sales are slated to increase.
“We believe once the market passes the current period of uncertainty, new financing volume should regain the torrid pace,” the group said.
Bank of America has forecast new money volume to reach $435 billion with refunding deals totaling $145 billion.
“Once a declining yield trend is established in a few weeks, a recovery of refunding activity should be expected,” the group said.
That uptick in muni issuance is running about 20% over last year’s pace which was a record year for sales, according to data compiled by Bloomberg.
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