By Amey Stone
The municipal bond market hasn't provided standout returns lately. Unless you are in a top tax bracket and buy a long-term muni -- which comes with a lot of interest-rate risk -- yields on an after-tax basis aren't much more than Treasuries. The largest muni index fund, the $42 billion iShares National Muni Bond exchange-traded fund, yields 3.3%, equal to about 5% for a taxable bond fund.
What has been remarkable about the muni market in recent years is the flood of new issuance. A record $510 billion in 2024 was followed by $580 billion in issuance in 2025, and the forecast is for $600 billion in 2026. A big reason for the surge in issuance is inflation, which has raised the cost of labor and materials for municipal projects.
Investors can take advantage of these dynamics by buying newly issued munis. "We find a lot of value in the primary market," says Dan Close, head of municipal fixed income at Nuveen. Issuers typically provide a slight price break, known as a concession, to make the new bonds attractive to buyers so they can get the deal done, he says.
"We anticipate a record year that will give retail investors plenty of new issues to choose from," says Close. "And in heavy weeks, there will be higher yields to clear the deal."
The yield advantage isn't huge -- just 0.05% or 0.1%, or five or 10 basis points, estimates Jeff Timlin, lead portfolio manager for municipal bond strategies at Sage Advisory. "Is that attractive? In muni land, yes," he says. "Every basis point counts." (A basis point is 1/100th of a percentage point.)
Getting access to new munis is getting easier for small investors. Fidelity Investments recently re-entered the municipal bond underwriting business and, as part of that effort, improved its website, where it fields more than 90% of individual investor muni orders. One recent example: For a Florida housing finance deal earlier this month, Fidelity collected more than 450 orders totaling $26 million.
Customers can sign up for email alerts, as about 70,000 people have done. "These investors aren't sitting at a Bloomberg terminal," says Liz Hanify, head of fixed-income sales, municipals, and product at Fidelity. "We want our clients to learn about transactions coming to market, and we've done a lot of work to support that."
Brokerages that don't underwrite their own offerings can also provide access. Charles Schwab, for example, has agreements with underwriters to make new issues available to customers via its website or through contacting one of its bond specialists. In 2025, it offered nearly 800 new-issue muni bonds to clients.
Financial advisors at big banks like Morgan Stanley can tap new issues their firm has underwritten on behalf of clients. And asset managers that offer separately managed accounts, like Nuveen, can also buy newly minted munis for those portfolios.
Allocations aren't guaranteed, and bonds may be parceled out pro rata on popular deals. But some of the largest municipal offerings include windows for individual investors to get in ahead of institutional investors, and they may even give local residents priority in allocations of new bonds.
Investors avoid direct commissions and may enjoy owning bonds that support specific initiatives, like a new elementary school in their town or clean water in their state. "We see strong interest for locally issued bonds where individuals can see and touch and feel the project," says Close. He often recommends that investors pair individual issues with a muni fund to benefit from diversification.
Most investors interested in a direct approach should avoid lower-rated munis. With triple-A rated securities, there isn't much credit risk to worry about, says Timlin. "But if you want to get into areas with higher yields where you need to do more legwork, then paying a fee to a professional manager is worth it."
Write to Amey Stone at amey.stone@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 22, 2026 04:00 ET (09:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments