(Dec 5): Municipal bond bankers should prepare for a bigger onslaught of sales in 2025, even after a blockbuster year of supply.

States, cities, school districts, colleges, hospitals and other borrowers in the US$4 trillion (RM17.7 trillion) muni-bond market are poised to issue a record sum next year, according to annual supply forecasts collected by Bloomberg.

“We see even more supply on the table — refunding candidates are up and spending for capital projects will have to stay at a brisk pace to ensure infrastructure keeps up with first-world standards,” Abigail Urtz and Ryan Henry, strategists at FHN Financial, said in a research note on Wednesday.

The volume will be fueled by lingering infrastructure needs, a surge in refinancing deals as interest rates drop as well as less federal aid — which had reduced the need to take on more debt in the years following the pandemic.

“Certain local governments will get less federal help because of the cost cutting initiatives that is suppose to be planned next year,” said Vikram Rai, head of municipal strategy at Wells Fargo & Co, in an interview. The cuts “will mean that the state and local governments will have to issue more debt to make up their financial needs.” Rai has called for US$500 billion of muni issuance next year.

That forecast is in line with most expectations for 2025 sales, according to ten projections collected by Bloomberg. The majority of analysts expect issuance to total between US$460 billion and US$540 billion — with Hilltop Securities as the sole outlier, calling for a whopping US$745 billion. On average, the analysts expect about US$524 billion of new bond sales, the data shows.

Alice Cheng, a municipal credit analyst at Janney Montgomery Scott LLC who foresees US$520 billion in supply, is anticipating growth across the housing, healthcare and education sectors.

“Issuers still have a lot of needs that need to be addressed,” she said.

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