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26th May 2026

Municipal market update

The municipal market continues to evolve as investors increasingly focus on essential infrastructure assets with durable revenue streams and strong implicit government support, rather than relying solely on traditional legal repayment structures. Sectors such as water, public power, and transportation are being viewed as strategically important assets that governments are unlikely to allow to fail, potentially creating opportunities for investors who prioritize essentiality and long-term revenue stability.

The SIFMA Municipal SWAP Index reset to 1.64%, 69 basis points below the prior week.

At the same time, the market continues to attract new participants, highlighted by Flagstar Bank announcing plans to begin underwriting municipal bond transactions. Broader macroeconomic conditions remain challenging as Federal Reserve Governor Christopher Waller signaled that future interest-rate hikes remain possible if inflation persists following energy-related price pressures tied to the Iran conflict. Higher rates are already impacting other sectors, with 30-year mortgage rates climbing to 6.51%, the highest level since August, potentially slowing housing activity. Despite these headwinds, the municipal market continues to modernize, with electronic trading volumes reaching 19% of total muni trading activity in February, nearly double 2023 levels, contributing to improved liquidity and market efficiency.

Municipal bond funds recorded $1.5 billion of inflows in the latest weekly data. The SIFMA Municipal SWAP Index reset to 1.64%, 69 basis points below the prior week.

The three largest transactions of this week include:

  • $2.147 billion New York City Transitional Finance Authority, Future Tax Secured Subordinate Bonds, Fiscal 26 Series G, G-1, G-2, I, & H (Aa1/AAA/AAA/NR)

  • $329.645 million Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, Series 2026 (Aa1/NR/NR/NR)

  • $317.26 million Medical University Hospital Authority, Hospital Mortgage Revenue Bonds, Series 2026 (Aa2/AA+/NR/NR)

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