JPMorgan Lifts 2025 Muni-Bond Sales Forecast to $560 Billion

JPMorgan Chase has increased its forecast for 2025 municipal bond issuance by 14% to $560 billion, driven by increased borrowing from state and local governments; the bank expects $510 billion of this to be tax-exempt, which is 30% above the trailing five-year average.

Analysis

JPMorgan Chase & Co. has significantly revised its 2025 municipal bond issuance forecast upwards by 14%, from an earlier $490 billion to $560 billion, as detailed in a recent research report led by Peter DeGroot. This upward revision is attributed to an anticipated increase in borrowing activities by state and local governments. A substantial portion of this issuance, $510 billion, is projected to be tax-exempt, marking a notable increase from the previous estimate of $450 billion and representing a figure approximately 30% higher than the trailing five-year average for such sales. This forecast, accompanied by a 'strongly positive' general sentiment signal, suggests a more active municipal bond market in 2025, reflecting potentially greater financing needs at the state and local levels and indicating expectations of robust activity and potential opportunities within the sector.

Key Decisions for Investors

• Investors should anticipate a significantly larger supply of municipal bonds in 2025, particularly tax-exempt issues, which may present broader investment choices.
• Given the projected $510 billion in tax-exempt sales, 30% above the five-year average, investors seeking tax-advantaged income should monitor this market segment for increased new issuance opportunities.
• It may be prudent to re-evaluate allocations to the municipal bond market and prepare for careful credit selection amidst the expected rise in issuance volume.