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Decreased Supply Could Bode Well for Munis

Elements of the tax changes could dampen some demand, but overall the market isn't predicting disaster for municipal bonds.

Elizabeth Foos: While we continue to watch several credit stories in the muni market, it's been the market technicals making the largest impact as we enter 2018.

The debate over U.S. tax reform alone was enough to spur a record amount of activity for munis December. That impact is expected to be felt throughout the next year. As issuers rushed their deals to market ahead of the new tax bill's start on Jan. 1, muni issuance totaled nearly $70 billion in December; that's more than 3 times the amount of muni debt issued in December of 2016. With that, many are predicting a significant decrease in supply in 2018, which should bode well for current muni bond investors if demand holds up.