U.S. Municipal Bond Market Preview: Week of July 14, 2025

Welcome to the weekly preview of the U.S. municipal bond market for the week starting July 14, 2025. This in-depth analysis is designed for financial professionals and investors seeking actionable insights into issuance, market dynamics, and macroeconomic influences on tax-exempt debt. Below, we break down key developments by day, followed by a comprehensive week-long outlook.

Monday, July 14, 2025

Municipal Bond Issuance Calendar

• City of Chicago, IL: $500 million in General Obligation (GO) bonds, structured as fixed-rate, long-term debt with maturities out to 30 years. Credit quality rated A- by S&P due to ongoing pension liabilities. This is a competitive sale, with strong interest expected from institutional buyers seeking yield in the Midwest.
• State of California: $300 million in revenue bonds for water infrastructure, rated AA by Moody’s, reflecting robust state backing. Negotiated sale with a focus on ESG-conscious investors.

Municipal Market Data

• The municipal yield curve starts the week with a 10-year AAA benchmark yield at approximately 3.25%, reflecting a slight steepening from last week as long-term rates edge higher amid inflation concerns.
• Short-end yields (1-5 years) remain anchored near 2.10%, supported by steady demand for liquidity.

Market Sentiment

• Trading flows are expected to be moderate as investors position for mid-month issuance. Secondary market performance shows tightness in high-grade credits, with bid-ask spreads narrowing.
• Dealers are holding lean inventories, cautious of potential rate volatility following recent Federal Reserve commentary.

Policy & Legislative Context

• Discussions in Congress regarding potential extensions to infrastructure funding programs could bolster demand for project-specific municipal bonds. Investors are monitoring for updates on federal tax exemptions, which remain a key driver of muni appeal.

Macro-Economic Context

• No major U.S. data releases scheduled for Monday, but lingering effects of last week’s employment data may keep yields range-bound as investors assess labor market strength and its implications for Fed policy.

Tuesday, July 15, 2025

Municipal Bond Issuance Calendar

• New York Metropolitan Transportation Authority (MTA): $750 million in revenue bonds, structured as serial and term bonds with a green bond designation. Rated A by Fitch, reflecting farebox recovery risks. Negotiated sale targeting sustainable investment funds.
• Houston Independent School District, TX: $200 million in GO bonds for facility upgrades, rated AA- by S&P. Competitive sale expected to draw regional bank interest.

Municipal Market Data

• 10-year AAA yields hover near 3.27%, with potential for slight upward pressure if Treasury yields react to broader market moves.
• 30-year yields approach 3.85%, appealing to long-duration buyers like pension funds.

Market Sentiment

• Secondary market activity may pick up as new issuance absorbs capital. High-grade bonds continue to trade at premiums, while lower-rated credits see selective buying.
• Dealer positioning remains conservative, with focus on underwriting new deals over secondary market risk.

Policy & Legislative Context

• Continued focus on federal infrastructure bills, with potential announcements on public-private partnership incentives that could spur municipal issuance in transportation and energy sectors.

Macro-Economic Context

• U.S. Consumer Price Index (CPI) data for June is released today. A higher-than-expected inflation print could push Treasury and muni yields upward, dampening demand for longer maturities.

Wednesday, July 16, 2025

Municipal Bond Issuance Calendar

• Los Angeles County, CA: $400 million in GO bonds for public health facilities, rated AA+ by Moody’s due to strong tax base support. Competitive sale with robust demand anticipated from yield-seeking investors.
• State of Florida: $250 million in highway revenue bonds, rated AA by S&P. Negotiated sale aimed at institutional buyers.

Municipal Market Data

• Yield curve dynamics remain stable, with the 10-year AAA yield at 3.28%. Short-term yields hold steady near 2.10% as reinvestment demand persists.
• Spreads between AAA and A-rated bonds widen slightly, reflecting credit risk concerns in select sectors.

Market Sentiment

• Trading flows are steady, with secondary market activity focused on new issues. Investors are selectively adding to positions in high-grade names.
• Dealers report balanced inventories but remain cautious ahead of key economic data later in the week.

Policy & Legislative Context

• Federal Reserve officials are scheduled to speak on monetary policy, with markets attentive to any hints of rate hike timelines. Tightening signals could pressure muni yields higher.

Macro-Economic Context

• Industrial Production data for June is released, offering insights into manufacturing health. Strong data could reinforce expectations of Fed tightening, impacting tax-exempt yields indirectly through Treasuries.

Thursday, July 17, 2025

Municipal Bond Issuance Calendar

• City of Boston, MA: $300 million in GO bonds for capital improvements, rated AA+ by S&P due to strong fiscal management. Competitive sale expected to price tightly given regional demand.
• Port Authority of New York and New Jersey: $500 million in revenue bonds for airport upgrades, rated A+ by Moody’s. Negotiated sale targeting infrastructure-focused funds.

Municipal Market Data

• 10-year AAA yields edge up to 3.30% if earlier inflation data disappoints. Long-end yields (30-year) near 3.90%, attracting liability-driven investors.
• Curve steepness persists, reflecting uncertainty over long-term inflation expectations.

Market Sentiment

• Secondary market sees increased volume as portfolio managers adjust holdings post-issuance. High-grade credits remain well-bid, while riskier sectors lag.
• Dealers are active in underwriting but cautious on taking additional risk without clearer rate direction.

Policy & Legislative Context

• Updates on state and local government aid programs are expected, with potential impacts on issuer credit quality and investor confidence in lower-rated munis.

Macro-Economic Context

• Weekly Jobless Claims data is released, providing a near-term view of labor market conditions. A spike in claims could ease pressure on yields, supporting muni demand as a safe haven.

Friday, July 18, 2025

Municipal Bond Issuance Calendar

• State of Texas: $600 million in GO bonds for education funding, rated AAA by all major agencies due to strong reserves. Competitive sale expected to close the week with strong demand.
• San Francisco Bay Area Rapid Transit District (BART): $200 million in revenue bonds, rated A by Fitch. Negotiated sale targeting regional and ESG investors.

Municipal Market Data

• 10-year AAA yields likely to settle near 3.30%-3.35% depending on week’s data outcomes. Short-end yields remain stable near 2.10%-2.15%.
• Spreads to Treasuries could tighten if risk-off sentiment dominates heading into the weekend.

Market Sentiment

• Trading flows taper off as the week ends, with focus shifting to next week’s calendar. Secondary market performance remains firm for high-grade credits.
• Dealers look to offload any remaining inventory, potentially offering attractive entry points for opportunistic buyers.

Policy & Legislative Context

• Final comments from Fed officials this week could solidify expectations for monetary policy, influencing muni market sentiment into the following week.

Macro-Economic Context

• Retail Sales data for June is released, a key indicator of consumer spending. Strong numbers could fuel inflation fears, pushing yields higher and testing muni demand.

Week-Long Outlook: July 14-18, 2025

Municipal Bond Issuance Calendar

• Total issuance for the week is projected at approximately $3.3 billion, a moderate volume compared to prior weeks. Key sectors include general obligation, transportation, and education, with a mix of competitive and negotiated sales.
• High-grade issuers dominate, though select A-rated credits offer yield pickup for risk-tolerant investors. ESG-labeled bonds, particularly in transportation and water, are expected to see strong uptake.

Municipal Market Data

• The municipal yield curve is likely to maintain its current shape, with 10-year AAA yields ranging between 3.25%-3.35% and 30-year yields near 3.85%-3.95%. Volatility in Treasuries could spill over, especially post-CPI and Retail Sales data.
• Spreads between high-grade and lower-tier credits may widen marginally if economic data signals uneven recovery.

Market Sentiment

• Investor demand is expected to remain robust for high-quality credits, driven by tax-exempt yield appeal amid uncertain equity markets. Secondary market activity will likely peak mid-week as new issues settle.
• Dealer positioning will stay cautious, with focus on managing underwriting risk rather than expanding secondary holdings. Risk-off sentiment could emerge if macroeconomic data disappoints.

Policy & Legislative Context

• Infrastructure funding and federal aid to state/local governments remain key themes, with potential legislative updates providing tailwinds for issuance and credit quality. Any clarity on Fed rate policy will be critical for yield expectations.
• Ongoing discussions around tax policy could influence muni demand, particularly if changes to tax-exempt status are floated.

Macro-Economic Context

• The week’s economic calendar—featuring CPI, Industrial Production, Jobless Claims, and Retail Sales—will shape broader fixed-income sentiment. Strong data could stoke inflation concerns, pushing yields higher and testing muni demand, while weaker prints may reinforce munis as a safe haven.
• Treasury market movements will be a primary driver of muni yields, with indirect effects from Fed commentary and global risk sentiment also in play.

Disclaimer: This AI-generated analysis is provided for informational purposes only and should not be considered as investment advice.