Municipal bond patrons are discovering extra methods to sleep properly at night time. Within the first half of 2025, a rising share of latest points got here to market with a belt-and-suspenders enchantment – stable credit score high quality paired with insurance coverage, providing buyers each sturdy fundamentals and an additional layer of safety.
The numbers inform a compelling story. Throughout these six months, the quantity of municipal debt backed by insurance coverage climbed by 12.4% in comparison with the identical interval final 12 months. Collectively, the 2 main bond insurers, Assured Warranty and Construct America Mutual, assured $22.1 billion in issuance, up from $19.4 billion in early 2024, in accordance with The Bond Purchaser. The full was unfold throughout 873 offers, a rise from 770 in the identical interval final 12 months, an indication that extra issuers are choosing insurance coverage.
The insured share of complete municipal issuance reached about 7.9% from January by way of June of this 12 months, in step with the 7% to eight% vary seen since 2021. Whereas which may appear modest, it represents billions of {dollars} in further safety for bondholders navigating an more and more advanced market panorama.
Market Management and Rising Confidence
Assured Warranty emerged because the dominant participant, insuring 64% of the insured par quantity bought within the first half of 2025. Throughout that point, it insured $14.1 billion in par worth of latest municipal points, 30% greater than in the identical interval final 12 months, and the best first-half complete the corporate has reported in additional than a decade.
The momentum accelerated within the second quarter alone, when Assured insured $9.5 billion throughout 252 offers – a 32% year-over-year enhance in quantity and a 41% soar in deal depend. These figures counsel that each giant and small issuers are more and more viewing insurance coverage as a worthwhile funding.
Maybe most telling is what occurred with high-quality bonds. Assured mentioned it insured 54 already high-grade, AA-rated points totaling $3.3 billion within the second quarter. Over the primary half of 2025, it wrote greater than 100 insurance policies protecting about $5 billion of such high-quality debt. This development underscores that even well-rated bonds are benefiting from the added safety of insurance coverage, suggesting that market contributors see worth past simply credit score enhancement.
Construct America Mutual, commanding about 36% market share, insured roughly $8.0 billion throughout 400 offers. Of these, 27% have been AA-rated, indicating the same sample of sturdy credit in search of further safety.
A Win-Win Situation
The rise in insured issuance creates advantages that ripple by way of the whole municipal bond ecosystem. For buyers, insured municipal bonds provide a pathway to entry lower-rated, although nonetheless investment-grade, issuers whereas benefiting from the insurer’s sometimes AA or greater ranking. That improve could make sure bonds interesting to a broader investor base and infrequently ends in higher pricing and improved liquidity.
“Extra insured bond volumes general counsel higher monetary metrics for the businesses themselves, plus improved liquidity for insured paper,” famous Matt Fabian of Municipal Market Analytics, in accordance with The Bond Purchaser. This commentary captures the self-reinforcing nature of the development – as insurers write extra enterprise, their very own monetary energy improves, which in flip makes their ensures extra precious.
The timing couldn’t be higher for buyers in search of stability. Amid hovering issuance and waves of reinvestment {dollars}, municipal bond buyers are encountering an atmosphere that more and more rewards these with sharp perception, well timed data, and a transparent view of the place worth is rising. Second-quarter buying and selling volumes hit a file excessive, and mutual fund inflows stay sturdy. High quality bonds are being snapped up rapidly, making it important for buyers to remain engaged and attuned to shifts in demand and worth throughout the yield curve.
Broader Market Assist
Confidence within the broader market stays stable, bolstered by latest developments on the federal stage. This week, S&P reaffirmed america’ AA+ credit standing, citing elevated tariff income as a key offset to the fiscal impression of latest tax cuts and spending measures.
“Amid the rise in efficient tariff charges, we anticipate significant tariff income to typically offset weaker fiscal outcomes which may in any other case be related to the latest fiscal laws, which comprises each cuts and will increase in tax and spending,” S&P famous in its report. The ranking company added that “significant tariff income has the potential to offset the deficit-raising elements of the latest funds laws.”
This reaffirmation helps help the municipal market backdrop, significantly for buyers targeted on underlying credit score fundamentals and longer-term revenue stability. Federal credit score energy bolsters confidence in state and native obligations, making a extra favorable atmosphere for municipal issuers and their bondholders.
Provide Meets Regular Demand
The insurance coverage development is taking part in out in opposition to a backdrop of strong issuance. Complete municipal bond issuance has already reached $366 billion in 2025 and is on tempo to hit $575 billion to $600 billion by year-end, in accordance with The Bond Purchaser. Regardless of this hefty provide, most of it’s being met with regular demand, thanks partially to an estimated $55 billion in August reinvestment money from maturing bonds and curiosity funds.
Particular person buyers proceed to play a major function in driving this demand. A latest week noticed practically 375,000 municipal bond trades, many in lot sizes that point out people are actively and steadily including to their portfolios. This retail participation gives a secure basis for the market, as particular person buyers sometimes purchase and maintain moderately than commerce incessantly.
The mix of elevated insurance coverage protection, sturdy underlying credit score high quality, and sturdy demand means that the municipal bond market is evolving in ways in which profit all contributors. For issuers, insurance coverage can decrease borrowing prices and broaden investor enchantment. For buyers, it gives further safety and higher liquidity. And for insurers, the rising volumes strengthen their enterprise fashions and market place.
Because the market continues to mature and adapt to altering circumstances, the development towards higher insurance coverage penetration seems more likely to persist, providing municipal bond buyers yet one more device for constructing diversified, income-generating portfolios with an enhanced margin of security.
