(Bloomberg) — JPMorgan Chase & Co. raised its forecast for 2025 municipal bond issuance by 14% as state and local governments step up borrowing efforts.
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The bank’s muni strategists led by Peter DeGroot lifted their full-year issuance prediction to $560 billion from $490 billion, according to a research report published Friday. Almost all of the sales, $510 billion, is expected to be tax-exempt — up from an earlier projection of $450 billion and about 30% higher than the trailing five-year average.
The revision comes “in advance of potential policy limiting the authorization to issue tax-exempts in certain sectors of the market, pent up need for capital, and the cumulative impact of inflation on funding needs across the market,” the strategists wrote in the report. JPMorgan is the third-largest underwriter of muni bonds so far this year, according to data compiled by Bloomberg.
States and local governments sold $20 billion of debt last week, the most since the end of 2017, according to data compiled by Bloomberg, as pandemic-era stimulus aid wanes and inflation drives up the cost of projects.
So far this year, California has issued the most muni bonds, followed by New York, according to the report. States such as Indiana, Nebraska, Ohio, Colorado and Connecticut that tend to issue bonds at a lower volume saw increases in debt sales of more than 80%.
While the higher education, airport and health care sectors saw an increased pace of muni-bond sales in the first half of the year, JPMorgan strategists expect a slowdown, “assuming the GOP’s reconciliation bill continues to leave the tax-exemption off the list of budget cuts.”
The industry has been on edge with the possibility of muni-bonds losing their tax-exempt status as lawmakers look to raise revenue to offset the costs of the Trump administration’s tax cuts.
–With assistance from Amanda Albright.
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