Issuance rose in January on a year-over-year basis, as issuers came to market amid policy uncertainty and possible tax changes.
January's volume was at $35.243 billion in 486 issues, up 10.8% from $31.817 billion in 554 issues in 2024, according to LSEG data. January's total also surpasses the 10-year average for the month of $28.675 billion.
Part of the rise in issuance stemmed from the desire to get ahead of volatility before the new administration had pushed for various fiscal and monetary policy changes, according to Alice Cheng, a credit analyst at Janney.
This uncertainty, she said, included this week's Federal Open Market Committee meeting. Although the Fed held rates in a range between 4.25% and 4.50%, there was pressure from President Donald Trump to cut rates accompanying the usual uncertainty around FOMC meetings, she said.
Some issuers also may fear Infrastructure Investment and Jobs Act monies may be "clawed back" or unable to be used in the future, Cheng said.
Therefore, issuers may have decided to come to market now instead of waiting and seeing, even though interest rate environments may not be the most favorable in January, according to Cheng.
The status of the tax exemption also played a role in issuers bringing deals.
Given concerns around the tax exemption and/or targeted tax changes specifically to healthcare and private universities, issuance could be front-loaded this year, so it's "not surprising" that 2025 got off to such a brisk pace, said James Pruskowski, chief investment officer at 16Rock Asset Management.
"It's coming at a time when rates are high and flows into mutual funds and ETFs are sensational," he said.
There is pent-up need and "missed opportunities" from last year when volatility sidelined issuers, especially toward the end of the year (post-election), Pruskowski said.
Even December, which was a strong month for issuance, most likely saw some deals postponed until January, he noted.
And volatility coming down from its peak has "opened the gates" for issuers to come to market, Pruskowski said.
Furthermore, COVID-era aid continues to dwindle, so issuers are forced to tap the markets to fund their capital needs, and January provided a "good time" to go to market, Cheng said.
The rise in issuance in January affirms that 2025 will be another strong year for supply, market participants said.
"January's supply will end up being heavier compared with the normally slow start of the year, but the pipeline should remain quite robust, in our view, and the 30-day visible supply continues to look healthy," said Barclays strategist Mikhail Foux.
Tailwinds for surging issuance in 2024 — which topped $500 billion after starting the year somewhat "muted" before ramping up in Q2 — will lead to even greater growth in 2025, with municipal bond issuance set to approach, or even surpass, last year's total, said Rob Dailey, head of PNC Public Finance.
Pent-up demand contributed to much of the projected growth, he said.
After several years of subdued activity, "there is now an apparent impetus to take action on projects that had previously been on hold," he said.
Another important part is the "catalyzing effect" of federal dollars, according to Dailey.
"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," he said. "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.
January issuance details
Tax-exempt issuance in January was at $31.45 billion in 428 issues, a 3.3% increase from $30.439 billion in 485 issues a year ago. Taxable issuance rose 36.7% to $1.849 billion in 54 issues from $1.352 billion in 68 issues in 2024.
New-money issuance rose 51.4% to $29.268 billion from $19.337 billion, while refundings fell 40.4% to $2.875 billion from $4.826 billion.
Revenue bond issuance increased 14% to $23.919 billion from $20.975 billion in January 2024, and general obligation bond sales rose 4.4% to $11.324 billion from $10.842 billion in 2024.
Negotiated deal volume was up 21.1% to $28.559 billion from $25.486 billion a year prior. Competitive sales increased 20.4% to $6.682 billion from $5.551 billion in 2024.
Bond insurance rose 24% to $2.717 billion from $2.19 billion.
Bank-qualified issuance fell 12.2% to $470.8 million in 108 deals from $536.1 million in 144 deals a year prior.
In the states, the Golden State claimed the top spot year-to-date.
Issuers in California accounted for $6.371 billion, up 12.6% year-over-year. Texas was second with $4.085 billion, up 11.3%. Florida was third with $3.046 billion, up 115.1%, followed by New York in fourth with $1.892 billion, up 35.5%, and Massachusetts in fifth with $1.5 billion, a 50.2% decrease from 2024.
Rounding out the top 10: Colorado with $1.481 billion, up 255.5%; Washington with $1.47 billion, up 12%; Ohio with $1.421 billion, up 3,631.4%; Oklahoma with $1.328 billion, up 304.1%; and Alabama with $986.5 million, down 67.8%.
