BY MOST accounts 2025 will be another blockbuster year for bond sales from local and state governments. And BlackRock’s head of municipal bonds Pat Haskell expects retail buyers to be eager to help digest that flood of new issuance.
The more than US$500 billion in new muni deals Haskell is expecting in 2025 “should provide opportunities and dislocations where you can really find good bonds at good levels”, he said at BlackRock’s New York office. He took over the muni desk at the world’s largest asset manager earlier this year.
Mom-and-pop traders often invest in munis via separately-managed accounts or exchange-traded funds (ETFs) – such as BlackRock’s US$41 billion MUB, the largest muni ETF in the market – which are overseen by professional portfolio managers. Haskell expects demand for munis from smaller investors will be a key factor next year.
Muni exchange-traded funds have seen about US$17 billion of inflows this year, up from US$15 billion last year, according to data compiled by Bloomberg Intelligence.
“There’s room to grow,” Haskell said, pointing to the US$140 billion of muni outflows in 2022 that have yet to be made up. Haskell was brought on to boost business for BlackRock’s actively managed mutual funds.
Haskell’s team is preparing for a slew of potential outcomes once a new administration under president-elect Donald Trump takes charge in Washington. He expects any new policy changes to come quickly.
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A top concern for market makers has been the potential elimination of the tax-exemption status for municipal debt.
While Haskell is bracing for the debate and potential cheapening in the market on the back of that, he’s less concerned given munis are “the most efficient way to fund infrastructure in our country and infrastructure is one of the few issues that polls well on both sides of the aisle”.
In the meantime, Haskell said they are being careful of credits where the tax base or margins from fee-generating projects are narrow. BlackRock has also developed artificial intelligence tools that show economic activity by county or zip code, and the impact of extreme weather on credits.
“We are trying to look around the corner,” said Haskell. BLOOMBERG
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