Taking Stock of 2022

January 6, 2023

Taking Stock of 2022

2022’s muni bond market presented a number of challenges to issuers.

To start, interest rates ended up significantly higher over the course of the year. Issuers also experienced a series of sudden, acute swings in rates, particularly in periods of the year when supply (bond issuance) tends to be the most robust. 

And despite credit in investment grade sectors remaining generally solid due to federal support and red hot economic activity, pricing spreads on new issue bonds also widened from prior years as investors were much more selective given the outflows they had to manage and periodic swings in rates.

These market challenges were a shock to the system given how issuer-friendly the bond market has been over the last roughly twenty years: characterized by low rates, tight pricing spreads, and a consistent investor demand. 

This all added up to a market where price discovery was murky at best. 

What do I mean? If you were an issuer with a competitor sale in a week, it would be difficult to have a high degree of confidence as to where your bonds would price or what the market was determining as the fair price for bonds.

With the Fed expected to keep hiking rates at least through Q2 of 2023, these conditions are expected to remain a challenge for public sector CFO’s and debt managers. We’ll cover in subsequent blogs what some issuers are doing to adjust to this new normal.


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