Midwest municipal bond volume grew in 2024, but at a rate well behind the nation's during a record year for muni sales.
Issuers in the 11-state region sold $80 billion of municipal bonds, a 14.9% increase-year-over-year, as U.S. municipal volume rose 33.1%
"[2024] was the highest overall issuance in the Midwest in the last four years," said Richard Ciccarone, president emeritus of Merritt Research Services, an Investortools company. "However, compared to the nation... [the region] wasn't operating on all cylinders."
The region's delivered 15.6% of the national municipal bond volume total last year, according to data from LSEG Data & Analytics, formerly Refinitiv.
Midwest volume peaked in the third quarter, with $22.84 billion of deals, up 46.7% year-over-year, although the total number of issues in the second quarter — 810 — dwarfed all other quarters. The number of deals climbed 12.5% year-over-year, to 2,845.
Illinois issuers led the region in volume, with volume jumping to $17.37 billion, a 20.9% increase, in 2024. Driving that were several general obligation deals from the state of Illinois, and GO and refunding deals by Chicago, the city's Sales Tax Securitization Corporation and the Chicago Transit Authority.
Wisconsin had the highest number of issues, 492, an 18.6% increase over 2023, when it also saw the region's highest deal count by a significant margin. Its $11.65 billion of volume was the region's second-highest.
New money deals were up $60.17 billion in the region, a 16.8% year-over-year increase. Refunding volume barely budged, ticking up 0.53% to $12.09 billion in 2024. LSEG categorized another $7.76 billion as combined new money/refunding, up 26.6%.
Tax-exempt deals buoyed issuance in 2024, rising 17.25% year-over-year to $68.98 billion. Taxable volume dropped 10.1% to $8.33 billion. Deals subject to the alternative minimum tax shot up by 75.86% year-over-year, reaching $2.7 billion.
"I'm kind of concerned about the trends in the Midwest when it comes to new bond issuance," Ciccarone said. "We're going to need a catalyst to see a big boost in activity out here."
If the Trump administration and GOP-run Congress follow through on signals they will cut federal support, there will be a huge pent-up demand for infrastructure financing, he said.
"And we're going to have to see bond issues rather than pay-as-you-go," he added.
"Fortunately, Midwest debt levels are relatively conservative and can support the debt," especially in places like Ohio, Ciccarone said.
There was also a sharp decrease in the percentage of variable-rate debt, he said, "which suggests lower confidence that interest rates are going lower."
After cutting rates in December, the Federal Open Market Committee
North Dakota showed the Midwest's biggest volume gain with a 72.6% gain to $1.56 billion, followed by Wisconsin at 37.5% and Ohio, with an increase of 19.6%, to $9.36 billion.
Michigan, Iowa and Missouri saw their bond issuance drop year-over-year.
The top three issuers in the region last year were the city of Chicago, state of Illinois and nationwide conduit issuer Wisconsin Public Finance Authority. The state of Wisconsin and the Illinois Housing Development Authority rounded out the top five.
The education sector topped regional issuance, with $19.93 billion in volume, a 5.65% decline from 2023's volume.
It was primarily
"Housing's stronger showing is almost entirely due to the fact that [housing bonds] are more economically viable given that interest rates are higher," Ciccarone said. "When interest rates go up, that extra subsidy that you get from a housing bond makes a much bigger difference."
Housing bonds are particularly appealing to states that have mature and active state housing agencies, he said. Illinois and Michigan led that surge, with some other states joining in, too.
"To me, the interesting thing is we've been in this four-year trend in which education is not faring like it used to," Ciccarone said. "That category has been shrinking and actually showed a real negative number this year."
Declining demographic trends in the school-age population are the primary reason, he said. Also, school districts are increasingly looking to bonds to support existing facilities rather than finance costly additions.
The gap between revenue and general obligation issuance widened last year, with deals LSEG classifies as revenue bonds increasing 20.98% to $48.35 billion, and GO volume climbing only 6.68% to $31.65 billion.
Debt wrapped with bond insurance rose a modest 3.18%, reaching $7.157 billion in 2024.
The Illinois state government had two of the region's four largest deals, and three of the top 12, including the region's table-topping
In second place was Minnesota's $1.59 billion Aug. 6 GO bond sale. The competitive sale was rated triple-A by Fitch, Moody's and S&P. Public Resources Advisory Group was municipal advisor and Kutak Rock was bond counsel, according to the official statement.
"MMB was pleased with the pricing last August, receiving true interest costs for the larger new money series of 3.23% and 3.28% respectively," said Jennifer Hassemer, assistant commissioner for debt management at Minnesota Management and Budget.
"For the tax-exempt series, we received either five or six bids in each of our competitive sales, meeting our expectations on market participation," she added. "And the spreads were competitive even in light of a slight size premium given the size of the sale."
Chicago's $1.567 billion October deal for O'Hare International Airport completed the top three. The bonds were rated A-plus with a stable outlook by Fitch, Kroll Bond Rating Agency and S&P.
JP Morgan and Jefferies were lead managers on the deal; Frasca & Associates was municipal advisor; and Katten Muchin Rosenman and Neal & Leroy were co-bond counsel on the deal, according to the official statement.
Across the Midwest, the top senior manager in 2024 was JP Morgan Securities, credited by LSEG with $9.341 billion of issuance. It was followed by RBC Capital Markets, BofA Securities, Stifel Nicolaus and Robert W. Baird. Jefferies, Piper Sandler, Wells Fargo, Barclays and Goldman Sachs filled out the top 10.
The top financial advisor in the Midwest last year was PFM Financial Advisors, credited with $11.28 billion in par. Baker Tilly, Public Resources Advisory Group, CSG Advisors and Ehlers & Associates rounded out the top five. They were followed by Kaufman Hall & Associates, Caine Mitter & Associates, CFX Inc. and Acacia Financial Group.
The region's top bond counsel in 2024 was Kutak Rock, credited with $9.364 billion in par. Next was Chapman and Cutler, followed by Ice Miller, Quarles & Brady and Miller Canfield. Gilmore & Bell, Squire Patton Boggs, Dorsey & Whitney, Foley & Lardner and Dinsmore & Shohl rounded out the top 10.
"What's going to dictate 2025 will be tax law changes and the impact of any reduction in grants from the federal government," said Ciccarone. "That's front and center. And interest rate trends will make a major difference."
Jessica Lerner contributed to this story.
