Municipal Bond News 11/10/25

Muni Bond Prices Are Appealing…Muni Bonds Poised For Gains…Chicago Board of Education Bonds Oversubscribed…State and Local Government Tax Hikes On Ballot…Muni Bond Supply Declines…Big Apple Millionaires Face Higher Taxes…Insured Muni Bonds Grow…Chicago Credit Outlook Lower…Voters Approve New Muni Bonds…

Muni Bond Prices Are Appealing…Municipal bonds present a notable yield advantage over taxable bonds. Additionally, a steep muni yield curve offers significantly higher yield for longer-dated tax-free bonds. An expert quoted in the Wall Street Journal last week stated, “There is strong demand because the municipal market offers a substantial yield compared to Treasuries and corporate bonds.” Furthermore, another expert mentioned in Market Talk this week that “municipal bonds are currently yielding more than double their five-year average spread over similarly rated corporate credit, presenting attractive entry points for investors.”

Muni Bonds Poised For Gains…In November, muni bond gains are likely to continue. A slowdown in the issuance of state and local government bonds is a tailwind for municipal bond returns. Historically, November has been the best month for munis, with gains averaging 1.26% over the past ten years. Last month, muni bonds saw the highest October returns in fifteen years. Despite muni bonds’ recent gains, the tax-free asset class remains undervalued relative to taxable counterparts, presenting a compelling entry point for investors.

Chicago Board of Education Bonds Oversubscribed…A two-fold oversubscription for $1.1 billion muni bonds sold by Chicago Public Schools (‘CPS’) last week reflects strong investor demand. These high yield tax-free muni bonds fetched a top yield for 5.58%, or about 200 basis points over top-rated muni benchmarks. Last week, Moody’s revised its outlook on Chicago Public Schools to ‘stable’ from ‘positive’, while affirming its ‘Ba1’ rating on the CPS bonds. Moody’s noted that the district’s budget gap for fiscal 2027 is estimated to be over $500 million.

State and Local Government Tax Hikes On Ballot…Voters weighed in on $3.1 billion of potential tax hikes last Tuesday. 20 U.S. states introduced tax-related ballot measures ranging from higher property and sales taxes to new local levies. State and local governments sought property tax hikes aggregating to $1.7 billion nationwide, sales tax hikes aggregating to $1.3 billion and millions more from other tax sources. This year, the largest voter approved tax hikes will fund public transit in Mecklenburg County, North Carolina and health/public safety in Santa Clara County, California.

Muni Bond Supply Declines…In October, states and local governments issued 17% fewer bonds than a year ago, marking the third straight month of declining muni bond issuance. However, year- to-date muni bond supply is 9.3% higher than a year ago. It appears that many issuers have chosen to front-load their bond issuance earlier in the year. This year, $505 billion new muni bonds have been issued so far, exceeding $495 billion new muni bonds issued in all of 2024.

Big Apple Millionaires Face Higher Taxes…Mayor-elect Zohran Mamdani has proposed raising taxes on millionaires and corporations to raise $9 billion of new revenue. Additionally, New York City has substantial autonomy to raise property tax to support the new Mayor’s high spending agenda. Debt-financed infrastructure and affordable housing developments are likely to gain traction. Implementation of policy changes will depend on the level of support from New York State. The governance relationship between New York State and New York City lends credit stability during leadership transitions. S&P said that “potential policy and budgetary changes will gradually evolve over time, resulting in no near-term impact to our general obligation rating on the city (S&P ‘AA/Stable’).

Insured Muni Bonds Grow…Insured muni bond new issue volume has outpaced overall muni bond issuance. This year, $34 billion insured muni bonds have been sold, up almost 18% from a year ago. Assured Guaranty’s insurance writing grew 29%, while Build America Mutual saw 2% growth in the first three quarters of 2025. Meanwhile, Moody’s changed its outlook on National Public Finance Guarantee, outlook from stable to negative, while affirming its ‘Baa3’ insurance financial strength rating. National Public Guarantee is not issuing new bond insurance policies.

Chicago Credit Outlook Lower…Last week, S&P lowered its outlook on Chicago while affirming its ‘BBB’ rating. The revision was prompted by the city’s reliance on one-time measures in the fiscal 2026 budget proposal, consecutive years of large budget deficits, and the proposed cuts to supplemental pension contributions. In defense of his $16.6 billion spending plan, Mayor Brandon Johnson said that his budget plan is “sound” and provides 65% structural remedies to close the deficit. S&P mentioned that it will be monitoring the fiscal 2026 budget negotiations in the coming weeks to evaluate the credit implications of the final budget package.

Voters Approve New Muni Bonds…On November 4, voters approved $12 billions of state and local government borrowing. 2025 Election Day ballots asked voters to weigh in on $15.7 billion worth of bond measures. That’s down from $52 billion worth of new bond measures on the 2024 ballot. Close to half of this year’s bond measures were in Texas, driven by the Lone Star state’s growing population. The largest approved bond measures include $2 billion bonds for a Texas school district and $1.9 billion bonds for Columbus, Ohio affordable housing and infrastructure.

Compare 30-Year taxable U.S. Treasury yield 4.68% to 30-Year tax-exempt Municipal Bond yield “AAA” 4.11%; “AA” 4.35%; “A” 4.59%. For investors in the 35% tax bracket, a 4.11% tax-exempt yield is equivalent to a 6.32% taxable yield. Top-rated long-term tax-free bonds yield 88% of comparable taxable U.S. Treasuries.