Municipal Strategy Monthly June Performance Review

Research evidence excerpt

Municipal Strategy Monthly June Performance Review

empt curve by shortening maturities

and favoring higher-coupon structures, while high-yield and ESG issuance continue to lag the

broader market. Sector trends remain mixed: healthcare and prepay gas supply have stayed

elevated, transportation issuance is expected to rebound in the second half, higher education

borrowing may moderate after a strong start to the year, and municipal housing issuance has so

far underwhelmed (see 2026 Supply – More Than Expected, 16 June 2026).

New York MTA’s Structural Revenue Shift

COVID permanently altered the MTA’s revenue model, reducing its reliance on fares and

increasing dependence on stable government funding. Farebox revenue fell from roughly 40%

of total revenue pre-pandemic to about 20% in 2025, while state support grew to become the

system’s largest revenue source at roughly one-third of revenues. Combined federal, state, and

local funding now represents a majority of the MTA’s revenue base, providing a more

predictable funding stream to support operations, capital investment, and debt service. While

ongoing labor negotiations bear watching, the shift toward tax-supported revenues strengthens

the MTA’s credit profile by reducing exposure to ridership volatility and improving long-term

financial stability (see Waiting For The Right Shot, 12 June 2026).

Military Housing

The value proposition for military housing bonds lies in their combination of relatively strong

credit characteristics and attractive spread pickup. Credits are typically investment grade and

benefit from stable demand drivers, including high occupancy and cash flows that are indirectly

supported by government policy via BAH. At the same time, investors are compensated for

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