The following conversation was recorded on September 29th, 2026.
Despite recent volatility, what is the outlook for U.S. Municipal Finance?
Bob Spangler: Rates are obviously up pretty dramatically but, fundamentally, the market remains strong.
We’re currently at $476 billion of issuance in our market. About $125 billion of that is refundings, which leaves new money at around $340 billion, and I think we will reach around $585 billion for the calendar year.
So, we're in a market now that's grown quite a bit. Part of that is a reflection of state and local governments’ responsibility in building infrastructure in the U.S, and part of it is inflationary.
Will rising rates slow refunding activity?
Spangler: 30% of the issuance year to date has been refunding. That compares to 25% on average over the last five years. We’ve had a run-up in refundings up through September but, with rates having risen as much as they have, we’re not anticipating that level of refundings going forward.
Do you expect new issuance to continue to grow?
Spangler: This is a $4.2 trillion market with more than 50,000 municipal issuers in the U.S.
Local governments continue to face ongoing funding needs for schools, roads, water and sewer systems, and other essential projects.
Local governments set out capital expenditures and project out what they need for three, five, 10 years out. So many of those capital needs will have to get funded no matter what. With that as a backdrop, the notion of us being in a market where we have elevated issuance for the next three to five years, if not beyond, is very real.
"The notion of us being in a market where we have elevated issuance for the next three to five years, if not beyond, is very real."
Bob Spangler, Head of U.S. Municipal Finance, RBC Capital Markets
Where are issuers deploying capital today and looking beyond traditional structures?
Spangler: In the current environment, issuers that compete against the taxable market are likely to be among the most active. We continue to see strength in single-family mortgage revenue bond issuance as the spread between tax-exempt and taxable funding has widened. Affordable housing, workforce housing and first-time homebuyer programs are all areas of continued focus.
We're also seeing significant activity in power and prepaid energy financing. Growing electricity demand from data centers is increasing the need for new generation capacity, while prepaid energy structures can help deliver meaningful savings directly to consumers. Prepaid gas deals now total more than $33 billion year to date, representing roughly 7% of the municipal market and already exceeding last year's volume.
Healthcare is another area of growth. Issuance is already running ahead of last year as providers look to improve efficiency and invest in their operations. We are also seeing growing interest in energy efficiency projects and industrial development bonds tied to reshoring and other public policy priorities.
"We’re also seeing a lot of focus on power. With all the data center buildout, this country needs every electron it can find."
Bob Spangler, Head of U.S. Municipal Finance RBC Capital Markets
Why has the market absorbed record issuance so well?
Keith Solomon: Despite increasing supply, the municipal market has benefited from a healthy supply-demand dynamic for several years.
Reinvestment cash continues to flow back into the market, while municipals have remained attractive to investors relative to other asset classes.
More recently, rising Treasury yields, inflation concerns and heavier new-issue supply have put pressure on municipal valuations. Yet that has also created opportunity.
As yields have moved higher, municipal bonds have become increasingly attractive to retail investors and crossover buyers evaluating relative value versus Treasuries. The result is renewed investor interest despite recent market volatility.
"Despite record supply, the muni market has remained remarkably resilient — reinvestment cash and steady inflows continue to support demand."
Keith Solomon, Head of Municipal Products, RBC Capital Markets
Has anything changed in relation to borrowers and their approach to capital?
Spangler: Our bread and butter remains state and local governments – schools, water and sewer, a lot of local transportation. Those will stay as long-term fixed-rate 20-, 25-, and 30-year bonds.
But what we’re starting to see is that those with a more dynamic revenue stream and cost basis are looking to be as creative as they can in finding products and reaching different investors.
How are investor expectations evolving?
Solomon: Investors are increasingly looking to get involved earlier in the process and seeking more customized opportunities.
Particularly within private capital, investors are looking for structures that better suit their needs while helping issuers access financing more effectively. That trend is creating greater flexibility in how deals are brought to market and funded.
How are we adding strategic value for issuers and investors?
Spangler: We’ve maintained a presence in the local markets where we've historically had strength.
That includes Texas, where we're currently the number one underwriter and represent roughly 15% of the market year to date.
We've continued investing in our core markets, including Colorado, Arizona, New Mexico, California, Illinois, Ohio and New Jersey, while combining that local presence with national sector expertise.
Our bank commitment to the municipal market, whether it be investors on third-party TOBs or directly as issuers, will exceed $25 billion by the end of this year.
This bank appreciates the market, appreciates the infrastructure and the vital nature of what we're funding, and appreciates that it is really the backbone of the U.S.
Solomon: We've maintained market share north of 10% in the new-issue market and have worked over the last three years to strengthen our position in the secondary market as well. By allocating more balance sheet to sales and trading, we've become a larger liquidity provider and a more meaningful counterparty for investors.
We've also expanded our high-yield capabilities, allowing us to pursue opportunities where other firms have pulled back or reallocated resources. As investors look for yield and more specialized opportunities, that part of the market has become increasingly important.
What is the outlook for municipal finance?
Solomon: While recent volatility has pressured the market, municipal bonds have historically proven resilient. Higher yields are attracting investor attention, and the market continues to benefit from strong long-term demand fundamentals.
Spangler: While refunding issuance may slow, the underlying need for capital remains. Infrastructure investment, housing, healthcare and other essential services will continue to require funding, supporting elevated issuance levels in the years ahead.
