US Taxable Municipal Mid-Year Outlook: Fairweather Fans

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US Taxable Municipal Mid-Year Outlook: Fairweather Fans

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May 28, 2026 12:37 PM GMT

Morgan Stanley & Co. LLCMUS Taxable Municipal Mid-Year Outlook | North Mark T Schmidt, CFA

America Strategist

Mark.Schmidt1@morganstanley.com +1 212 296-8702

Morgan Stanley India Company Private Limited+

Fairweather Fans Gowtami P Pyla

Strategist

Gowtami.Pyla@morganstanley.com +91 22 6995-2290

We like munis. But for taxables, we stay fairweather fans.

$400bn in AI-related corp supply – plus rising M&A – mean Morgan Stanley & Co. LLC Eva C Baurmeister

taxable munis may underperform alongside IG corps. Silver Strategist

Eva.Baurmeister@morganstanley.com +1 212 761-4588

linings: taxable credit quality looks solid for another year, while

taxable supply looks scarce. Morgan Stanley India Company Private Limited+ Samyuktha Gopal

Key Takeaways Samyuktha.Gopal@morganstanley.com +91 22 6995-2022

Morgan Stanley & Co. LLC

Spreads widen 10-15bp in our base case, placing Agg-eligible munis (inc. NFPs)

Christina C Sigler

near IG Corps at +80-90. Bull case +50-60; bear case +130-140. Strategist

Christina.Sigler@morganstanley.com +1 212 761-4116

Not-Agg-Eligible also widen in our base case, but stay 20-30 tighter than Agg

names given a shorter maturity profile.

Exhibit 1 : It's a Hyperscaler's World, and

Supply: we expect about $50bn (including $10bn NFP Corp CUSIPs). Taxable Munis Are Just Living In It

Housing remains our preferred sector for taxable investors. The 25% rule will 1.6 Taxable Muni OAS & Spread Targets

1.3-1.4

create more taxable housing paper. We also see value in high-grade universities. 1.41.2

1 0.8-0.9

Taxable technicals look much better than exempts for two sectors: Healthcare 0.8

0.6

and New York. The lion's share of supply in both should be tax-exempt. 0.4 0.5-0.6

0.2