# Municipalities Increase Infrastructure Bond Issuance

In August 2026, the U.S. municipal bond market saw record-high new issue supply that exceeded reinvestment demand, leading to underperformance of investment grade municipal bonds relative to U.S. Treasuries amid macroeconomic volatility. However, high yield municipal bonds posted positive returns, supported by credit upgrades such as those for the State of Illinois reflecting fiscal discipline. Elevated municipal bond issuance is expected to continue through the remainder of 2026, driven by ongoing infrastructure needs and refinancing activities.

- Municipalities across states including Illinois, California, and New York are increasing bond issuance to fund infrastructure projects and debt refinancing, creating procurement opportunities for contractors and service providers in these regions.
- Procurement professionals should anticipate sustained demand for infrastructure-related contracts backed by municipal bond financing, with potential for competitive bidding as supply remains elevated.
- Credit upgrades and fiscal discipline in certain states may improve borrowing terms, impacting contract funding and project viability.
- Contractors and vendors should evaluate market conditions and municipal credit trends to align business development strategies with upcoming infrastructure financing cycles.

**Jurisdictions:** sled
**Industries:** Construction & Infrastructure
**Topics:** Grants & Funding
**Published:** September 16, 2026

### Government Entities
- State of Illinois

### Vendors
- Goldman Sachs Asset Management (asset manager)

### Key Quotes
> Supply for the rest of the year should remain elevated given continued infrastructure needs and refinancing activity.
> — Scott Diamond, Co-Head of Municipal Fixed Income

> A resilient underlying economy and healthy reserve balances continue to put municipalities in a strong position to navigate the path forward.
> — David Alter, Head of Credit Research, Municipal Fixed Income

### Sources
- [Municipal Fixed Income Update August 2026 - Goldman Sachs Asset Management](https://am.gs.com/en-us/advisors/insights/article/municipal-fixed-income-monthly) - Goldman Sachs Asset Management