It’s likely to be a big year for the municipal bond market in 2025. While activity in the first half of 2024 was somewhat muted, the second half of the year saw a surge in issuance volume in the bond market. Tailwinds from this uptick are likely to lead to even greater growth in 2025, with municipal bond issuance set to surpass the $500 billion mark.1

Much of this projected growth is likely to stem from pent-up demand. After a few years of subdued activity, there is now an apparent impetus to take action on projects that had previously been on hold. The catalyzing effect of federal dollars is another important component, according to Rob Dailey, head of PNC Public Finance.

“Governments that have received federal infrastructure dollars for projects are now working on companion projects, whether that’s in the form of transit or infrastructure projects, affordable housing development, or some other type of commitment at the state, county, or city level. These adjacent projects are now starting to get moving, and that’s likely to help buoy demand in the bond market and in bank credit for the next couple of years,” said Dailey.

Government entities have also benefited from relatively high credit quality in both the bank and bond markets in recent months. However, the start of the new fiscal year in mid-2025 may signal a shift, as some local and regional entities are likely to find themselves in a tighter position for the upcoming budget year. Much of this will have to do with aftereffects of the COVID-19 pandemic, as liquidity from federal stimulus spending will largely have dried up. The decrease in available federal dollars is likely to have a meaningful impact on government balance sheets in the coming fiscal year.

The effects are likely to be similar for entities in the higher education and non-profit arenas, as they also look to combat budget shortfalls in the post-COVID era. Both spaces have seen changes in participation and usage patterns, as well as increased operational challenges in recent years, and this is likely to remain a long-term trend.

In all sectors, treasury management operations will continue to remain a major area of focus in 2025, as organizations seek to improve their resilience against cyberfraud, as well as streamline processes through automation and digital transformation.

Looking ahead, it remains to be seen what impacts may result from the outcome of the November elections. “We don’t yet know if there will be structural impacts that affect federal spending. But if there are significant bureaucratic changes, one result may be that there will be some innovation in techniques used to deliver financial assistance from the federal government to the states,” Dailey said.

Brilliant Begins Here

PNC Public Finance is committed to serving the financial needs of public sector entities of all types and sizes. Reach out to your Relationship Manager to learn more, or contact us.

Source

Muni Sales Set to Jump Past $500 Billion in 2025, Analysts Say

Additional Disclosure:

FINRA BrokerCheck
Check the background of PNC Capital Markets LLC on FINRA's BrokerCheck.
Learn More »