Executive Summary

• Having digested a record amount of net supply in 2025, we anticipate that the market will need to attract more than $250 bn of new money in order to clear the $600 bn of bonds that we expect will be issued next year.

• While we look for demand to remain very strong in the first 10-years of the curve, we think that longer maturities are more at risk from upward pressure on yields and spreads.

• In addition, we expect that the accelerating growth of the ETF market and the contraction of the mutual fund universe will add to the pressure on the long-end of the market.

• Supported in part by a constructive U.S. Treasury rate environment and expectations of Fed rate cuts in the first half of the year, we expect muni total returns will be positive in 2026, but we expect that returns will be tempered by rising muni/Treasury yield ratios.

2026 SUPPLY & NET SUPPLY FORECAST

We are looking for a third consecutive year of record new issue volume and for a significant increase in net supply.
From 2021 through 2023, net supply averaged $20 billion a year, but in 2024, net supply totaled $135 billion and for 2025, we expect that the final total will be about $207 bn.
Based on our forecast of $600 bn of new issue volume for 2026 (which would be an increase of about 5% over 2025’s expected total), and a combination of scheduled plus possible redemptions, we expect that net supply could be in the neighborhood of $280 billion.