After struggling with both supply and demand challenges amid Federal Reserve rate hikes in 2022–23, the municipal bond market came storming back with in 2024 with record new issuance of $533 billion alongside solid demand. Meanwhile, issuance in 2025 is on track to be even stronger, with $387 billion coming to market in the first eight months of the year.¹

Ample new-issue muni bond supply is good news for investment managers, in our view. Primary offerings can be an effective and efficient way for portfolio managers to build scale and enhance diversification, potentially providing managers access to large blocks of new bonds at prices that can be superior to similar secondary market bonds.

The primary market is not limited to rated bonds; in fact, 34% of the 200,000 municipal bonds issued from 1998 to 2017—or 14% of the $3.7 trillion in par value—did not obtain a credit rating from a nationally recognized statistical rating organization.²  

We don’t believe the lack of a rating should be interpreted as a reflection of a bond’s quality. Many unrated issues are smaller and less liquid than investment grade deals, and issuers often forgo ratings to avoid the associated expenses. To compensate for their greater complexity and information risk, however, unrated bonds typically pay investors a higher yield compared to rated issuers of similar quality. It’s been our experience that skilled credit managers may find favorable risk/return profiles within this opportunity set.

Direct lending, also known as private credit, offers distinct advantages. However, middle market companies seeking loans often times lack formal credit ratings, leaving the onus on private lenders to assess the risk. Tune into this video to learn the five C’s that are critical considerations for private lenders when evaluating direct lending investment opportunities.