January issuance falls but remains above 10-year average

While January issuance fell year-over-year, 2026 got off to a decent start as the same themes of 2025 ? higher costs, growing inflation and dwindling COVID-era aid ? played out last month.

Issuance was $34.308 billion in 471 issues, down 7.2% year-over-year from $36.982 billion across 536 transactions. However, the total was the third-highest monthly figure for January and topped the month's 10-year average of $29.699 billion.

While issuance is down year-over-year, $34.3 billion is still a "considerably decent" figure for the asset class, especially given the slower issuance at the start and end of the month, said James Welch, a municipal portfolio manager at Principal Asset Management.

So "it was a good month from an issuance standpoint," he said.

Even with the drop in issuance, a $2.7 billion difference between 2026 and 2025 is not necessarily "meaningful," especially compared to previous years, said Bryan Derdenger, managing director at Baird.

In some years January issuance was slow and then it "comes back out," he said.

"Our market is very seasonal in the sense that starting in January, it has a slow build [up] of supply and then kind of hits its peak supply in the summer months, and then starts to wane in November and December ? because of the holiday season," Derdenger said.

A possible explanation for the dip in issuance this January is, in 2024, many issuers "front-ran" supply into October prior to the election, and issuance was much lighter in November and December before an influx in January 2025, he said.

With the $34.3 billion supply figure in January 2026, "we might be normalizing from that aspect, and that's why we're a little less volume standpoint this January versus last year because we didn't have that frontrunning before the election, and then a normal course to build from in January," Derdenger said.

Overall, though, the same factors that contributed to the record issuance in 2025 carried over into the start of 2026, according to Welch.

Inflation is higher, project costs are up, and federal aid and support are reduced. Additionally, there is deferred maintenance on infrastructure projects, and their scale is sizable, he said.

For example, one of the largest deals of January was $1.267 billion of airport improvement revenue bonds from the Metropolitan Nashville Airport Authority, with some tranches set to cover capital projects.

And with refundings, depending on the macroeconomic "path" that will determine whether those deals will occur, is if inflation "kicks up" again, Derdenger said.

"We're going to see those refundings just not work quite yet, but if we continue down the path of getting closer to that 2% [inflation] threshold or lower, the long end rates can come down, we're certainly going to potentially see a really nice, successful year of refundings on top of all that new-money needs that many of the issuers are still continuing to process through their systems and build those infrastructure projects," he said.

Despite the dip in issuance, that does not necessarily portend a slower pace of supply in 2026, but February may also see issuance moderate, as the third week is holiday-shortened, Welch said.

However, "from a technical standpoint, we're going to continue to see positive demand, that whatever that number is, whether it's on pace, or whether it's slightly below or will increase, [the market] can absorb it," he said.

Overall, it's too early to tell the pace of issuance in 2026 with only one data point, but 2026 could potentially be another really solid year of issuance, as many others have expected, Derdenger said.

January details
Tax-exempt issuance ticked down 2.5% to $32.171 billion in 422 issues from $32.997 billion in 472 issues a year ago. Taxable issuance dropped 36.1% to $1.303 billion in 46 issues from $2.041 billion in 60 issues in 2025. AMT issuance was $833.8 million, down 57.1% from $1.944 billion in January 2025.

New-money issuance barely budged to $28.042 billion from $28.056 billion, while refundings were down 16% to $3.74 billion from $4.454 billion.

Revenue bond issuance fell 8.8% to $22.958 billion from $25.176 billion in January 2025, and general obligation bond sales decreased 3.9% to $11.351 billion from $11.806 billion in 2025.

Negotiated deal volume was down 13% to $26.069 billion from $29.976 billion a year prior. Competitive sales rose 22.7% to $8.218 billion from $6.698 billion in 2025.

Bond insurance decreased 34.8% to $1.891 billion from $2.9 billion.

Bank-qualified issuance was down 28.9% to $377.9 million in 83 deals from $531.4 million in 124 deals a year prior.

Texas claimed the top spot year-to-date among states.

Issuers in the Lone Star State accounted for $4.994 billion, up 19.3% year-over-year. New York was second with $4.964 billion, up 162.3%. California was third with $3.373 billion, down 47.1%, followed by Pennsylvania in fourth with $2.217 billion, up 134.4%, and Tennessee in fifth with $2.119 billion, a 9,050.3% increase from the same period in 2025.

Rounding out the top 10: Massachusetts with $1.74 billion, up 16.1%; Alabama with $1.504 billion, up 52.5%; Wisconsin with $1.237 billion, up 90.9%; Connecticut with $1.081 billion, up 159.6%; and Florida with $1.079 billion, down 64.6%.