Muni Market Faces $19 Billion Supply Wave, Biggest in Two Years

(Bloomberg) -- The relentless surge in municipal bond sales this year is showing no signs of slowing down as investors brace for the biggest jump in new issuance in two years.

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The amount of US state and city debt scheduled to sell in the next 30 days has climbed to almost $19 billion, the most since May 2022, data compiled by Bloomberg show. The measure typically represents a fraction of what actually comes to market as deals are announced with less than a month’s notice.

The bulk of the scheduled wave, $15 billion worth, is slated to price this week, amounting to double the 10-year weekly average. The slate presents a headwind for a muni market that’s slumped this year, in part because of the increased issuance. Last month, the swelling sales contributed to the biggest weekly jump in benchmark muni yields in four years.

“If you look at expectations on the calendar front, it seems like we might see a couple more weeks of heavy supply,” said Kara South, a portfolio manager for GW&K Investment Management. Based on historical trends, sales may taper off in July or August, she said.

Long-term muni issuance has tallied $190 billion this year, an increase of 35% from the same period in 2023, data compiled by Bloomberg show. States, cities, school districts and borrowers like colleges and hospitals are racing to market to avoid potential volatility around November’s US presidential election, which may usher in new tax policies.

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The muni market is down 1.9% this year, worse than the 1.6% loss for the entire US fixed-income market, Bloomberg index data show.

The latest burst of sales comes as 10-year Treasury yields, a benchmark for global borrowing, appear to have stabilized below their peak for 2024, reached in April.

“On balance, the market should be able to absorb this load of supply,” said Peter Block, a managing director at Ramirez & Co. “I just think we have to get a little cheaper.”

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