U.S. Municipal Bond Market Preview: Week of July 21, 2025

This preview provides a detailed outlook for the U.S. municipal bond market for the week starting July 21, 2025, offering insights into issuance activity, market trends, and key macro and policy drivers. Tailored for financial desks and investor newsletters, the analysis is structured by day with a comprehensive week-long outlook.

Monday, July 21, 2025

Municipal Bond Issuance Calendar

• Major Deal: State of California General Obligation Bonds
  • Size: Approximately $2.5 billion
  • Structure: Multi-series, including fixed-rate and variable-rate notes, with maturities ranging from 5 to 30 years
  • Credit Quality: Rated AA- by S&P, Aa2 by Moody’s, reflecting strong fiscal management but ongoing pension liabilities
  • Sale Type: Competitive sale, expected to attract significant institutional interest due to size and liquidity
• Smaller regional deals from Midwest school districts totaling around $300 million, primarily negotiated sales with A-rated credits.

Municipal Market Data

• Yield Curve: 10-year AAA municipal benchmark yield expected to hover around 2.75%, with a steepening curve as short-term yields remain anchored by anticipated Federal Reserve policy.
• Spreads to Treasuries: Anticipated tightening of 5-10 basis points on high-grade issues due to strong demand.

Market Sentiment

• Trading Flows: Secondary market activity likely to start the week slow as investors assess post-weekend positioning.
• Secondary Market Performance: High-grade bonds expected to see steady bid-ask spreads, while high-yield munis may face volatility due to risk aversion.
• Dealer Positioning: Dealers are moderately overweight on inventory, potentially pressuring prices if demand lags.

Policy & Legislative Context

• Ongoing discussions in Congress regarding extensions to infrastructure funding programs could bolster investor confidence in transportation and utility credits.
• No major federal tax law changes expected this week, maintaining stability in tax-exempt appeal.

Macro-Economic Context

• Key Data Release: None scheduled for Monday, keeping focus on lingering effects of prior week’s consumer confidence data.
• Influence: Stable economic indicators are likely to sustain demand for tax-exempt yields as a safe haven.

Tuesday, July 22, 2025

Municipal Bond Issuance Calendar

• Major Deal: New York City Transitional Finance Authority
  • Size: $1.8 billion
  • Structure: Fixed-rate bonds with maturities up to 25 years
  • Credit Quality: Rated AA by S&P, Aa1 by Moody’s, supported by strong revenue streams but tempered by urban fiscal challenges
  • Sale Type: Negotiated sale, targeting large institutional buyers
• Additional issuances from Southern utility districts, approximately $500 million, competitive sales with A to AA ratings.

Municipal Market Data

• Yield Curve: Short-end yields may dip slightly to 1.50% on 2-year AAA munis, reflecting safe-haven buying.
• Spreads to Treasuries: Expected to remain stable unless Treasury yields shift unexpectedly.

Market Sentiment

• Trading Flows: Increased activity anticipated as new issuance draws retail and institutional interest.
• Secondary Market Performance: Strong performance in investment-grade bonds; high-yield sector remains choppy.
• Dealer Positioning: Dealers likely to offload inventory from Monday, potentially creating buying opportunities.

Policy & Legislative Context

• Federal Reserve minutes from the prior meeting could provide clues on interest rate trajectories, impacting muni yield expectations.
• State-level budget updates may influence perceptions of credit risk for smaller issuers.

Macro-Economic Context

• Key Data Release: Existing Home Sales (July data)
• Influence: Weaker-than-expected housing data could push investors toward munis as a defensive play, compressing yields.

Wednesday, July 23, 2025

Municipal Bond Issuance Calendar

• Major Deal: Texas Water Development Board
  • Size: $1.2 billion
  • Structure: Revenue bonds, fixed-rate, with maturities between 10 and 30 years
  • Credit Quality: Rated AAA by S&P and Moody’s due to strong collateral and state backing
  • Sale Type: Competitive sale, expected to price tightly given high credit quality
• Smaller healthcare and university issuances totaling $400 million, mostly negotiated with A to AA- ratings.

Municipal Market Data

• Yield Curve: Mid-week stability projected, with 10-year AAA yields near 2.78%.
• Spreads to Treasuries: Potential for slight widening if Treasury volatility increases.

Market Sentiment

• Trading Flows: Moderate trading volume as mid-week issuance absorbs available capital.
• Secondary Market Performance: Steady demand for long-dated bonds; shorter maturities may lag.
• Dealer Positioning: Balanced inventories likely, with dealers cautious on high-yield exposure.

Policy & Legislative Context

• Congressional hearings on infrastructure spending could signal future muni market support, especially for green bonds.
• No immediate tax policy shifts expected, preserving current demand dynamics.

Macro-Economic Context

• Key Data Release: Durable Goods Orders (June data)
• Influence: Strong orders could signal economic resilience, potentially reducing muni appeal as risk assets gain traction.

Thursday, July 24, 2025

Municipal Bond Issuance Calendar

• Major Deal: Chicago Public Schools
  • Size: $900 million
  • Structure: General obligation bonds, fixed-rate, maturities up to 20 years
  • Credit Quality: Rated BBB+ by S&P, Baa1 by Moody’s, reflecting fiscal stress but recent stabilization
  • Sale Type: Negotiated sale, targeting yield-seeking investors
• Regional transportation authorities issuing $350 million in revenue bonds, competitive sales with mixed credit profiles.

Municipal Market Data

• Yield Curve: Possible flattening as long-term yields adjust to issuance supply.
• Spreads to Treasuries: Expected to hold steady unless macroeconomic data surprises.

Market Sentiment

• Trading Flows: Uptick in secondary trading as new issues settle and portfolios rebalance.
• Secondary Market Performance: Investment-grade bonds likely to outperform amid risk-off sentiment.
• Dealer Positioning: Dealers may build inventory late in the week, anticipating Friday demand.

Policy & Legislative Context

• Updates on federal debt ceiling negotiations could introduce volatility if deadlines approach.
• Local government pension reform discussions may impact credit perceptions for certain issuers.

Macro-Economic Context

• Key Data Release: Initial Jobless Claims (weekly)
• Influence: Higher claims could reinforce muni demand as a safe asset class, pushing yields lower.

Friday, July 25, 2025

Municipal Bond Issuance Calendar

• Major Deal: Florida Turnpike Authority
  • Size: $750 million
  • Structure: Revenue bonds, fixed-rate, with maturities from 5 to 25 years
  • Credit Quality: Rated AA- by S&P, Aa3 by Moody’s, supported by stable toll revenues
  • Sale Type: Competitive sale, likely to price aggressively given sector strength
• Limited smaller issuances, totaling $200 million, primarily negotiated sales for municipal utilities.

Municipal Market Data

• Yield Curve: End-of-week adjustments possible, with 10-year AAA yields potentially testing 2.80%.
• Spreads to Treasuries: Tightening expected if risk sentiment improves.

Market Sentiment

• Trading Flows: Reduced volume as investors lock in positions ahead of the weekend.
• Secondary Market Performance: Potential for outperformance in high-grade credits as month-end approaches.
• Dealer Positioning: Dealers likely to trim inventories, creating selective buying opportunities.

Policy & Legislative Context

• Wrap-up of weekly Congressional activity may provide clarity on infrastructure or tax-exempt bond policies.
• Federal Reserve commentary could sway expectations for rate hikes, impacting muni yields.

Macro-Economic Context

• Key Data Release: Personal Income and Spending (June data)
• Influence: Strong consumer spending could pressure yields upward as inflation concerns resurface.

Week-Long Outlook: July 21-25, 2025

Municipal Bond Issuance Calendar

• Total projected issuance for the week: Approximately $7.0 billion across major and smaller deals.
• Key sectors include general obligation, revenue, and transportation bonds, with a mix of competitive and negotiated sales.
• Credit Quality: Majority of issuance rated A to AAA, with select lower investment-grade credits (BBB range) offering higher yields for risk-tolerant investors.

Municipal Market Data

• Yield Curve: Expected to remain moderately steep, with short-term yields (1-5 years) anchored near 1.50%-2.00% and long-term yields (20-30 years) approaching 3.00%.
• Spreads to Treasuries: Anticipated range of 80-100 basis points for AAA credits, with potential tightening on strong demand.

Market Sentiment

• Trading Flows: Gradual increase through mid-week, tapering off by Friday as investors position for month-end.
• Secondary Market Performance: High-grade munis likely to see consistent demand; high-yield sector may face intermittent volatility.
• Dealer Positioning: Cautious inventory management expected, with dealers balancing supply absorption and client demand.

Policy & Legislative Context

• Infrastructure funding discussions remain a key positive driver, potentially boosting demand for project-specific bonds.
• Federal Reserve policy signals and state-level fiscal updates could influence risk perceptions, particularly for lower-rated credits.
• No immediate federal tax law changes anticipated, preserving the tax-exempt advantage of munis.

Macro-Economic Context

• Key Data Releases: Existing Home Sales, Durable Goods Orders, Jobless Claims, and Personal Income/Spending will shape risk sentiment.
• Influence: Mixed economic signals could reinforce munis as a defensive asset, though strong data may spur yield increases if inflation fears grow. Overall, tax-exempt demand is expected to hold steady, supported by retail and institutional buying.

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