Municipal New Issuance: Issuance for the month of June saw a total of $56.76 billion, bringing total issuance for the second quarter to $153 billion, and year-to-date totals to just over $284 billion. Issuance for the first half of 2025 is approximately a 21% increase from the first half of 2024. We should continue to see supply surge for the second half of the year as borrowers will start to issue more debt once the Fed cuts rates. We could see more of surge in issuance in some ESG projects if the Trump administration eliminates some Federal programs.

Municipal Spreads: June saw muni yields bump by an average of 7.6 basis points across the curve with yields on 10-year notes being bumped by 10.7 basis points. Although we did see yields fall this past month, munis did underperform versus Treasuries as the 10-year ratio is now yielding 75.83% compared to 75.24% at the start of the month. We also saw the muni curve steepen by 15.2 basis points to end the month at 190 basis points.

According the LSEG Lipper Global US Fund flows data, muni bond funds saw inflows for the month of June total to $1.14 billion which is a decrease from the prior month of May’s total inflow of $3.16 billion. The second quarter saw a total of $1.1 billion in outflows, mainly in the first month of the quarter due to rising rates and the announcement and imposition of tariffs which sparked a sell off. Current year-to-date totals for muni bond funds have added roughly $4.36 billion to their funds since the start of this year.

June was a positive month for munis with yields falling as month-to-date returns for the month of June total to .62%, bringing year-to-date returns to -.35%. A stark contrast to the prior month of May in which munis were flat for the month and a complete 180 from the month of April when we experienced loses of .81%. Munis are starting to slowly crawl out of the red as we were down 2.78% back in April when tariffs were put in place, which sent the markets into a frenzy. Since then, we have rallied with yields bumping by an average of 29.7 basis points.

Munis should be able to continue June’s rally as the month of July has been a historically positive month with eleven straight years of positive gains since 2014. With the Treasuries yields continuing to fall, inflation readings are pushing for a rate cut, as well as stronger than expected technicals, munis should continue their rally. With July being a slow month for issuances, demand should continue to remain high as investors are likely to continue to take advantage of higher yields and well as cheaper bonds when compared to Treasuries.

Municipal Supply: The negotiated calendar this week will take a breather as we head into the July 4^th Holiday. The calendar will have an expected volume of just $2.2 billion, with the largest deal of the week being the $939 million Massachusetts Bay Transportation Authority Senior Sales Tax Bonds issuance. The second largest deal of the week being the $308 million Los Angeles Unified School District Judgement Obligation Bonds issuance (Federally Taxable).

Have a great week!