US muni market shrugs off uncertainty as 2025 nears new money record | GWI

Global Water Intelligence, a UK-based publisher and consultant focused on the water sector, ran an article today with a section entitled “The slow demise of WIFIA”. Here are extracts, some of which may sound familiar:

Record new-money issuance for 2025 can partly be explained by the tail-off in federal support – mainly the diminishing impact of Infrastructure Investment and Jobs Act funding and the dramatic collapse of WIFIA loan volumes.

The flagship federal loan programme has seen its market share plummet from an estimated 17% of US water capital expenditure in 2021 to just 4% in 2024. “WIFIA loans are priced off US Treasury rates, competing directly with tax-exempt municipal bonds for the same borrowers and projects,” explained one federal finance expert who advised EPA during WIFIA’s growth phase.

The programme launched in 2018 during an unusually favourable window in which Treasury and municipal rates were uncommonly close together, making WIFIA’s low Treasury-based rates and generous repayment flexibility relatively attractive compared to issuing bonds for many projects. However, the Federal Reserve’s aggressive rate-hiking campaign from 2022 onwards restored a more normal relationship between Treasury and municipal rates, while the subsequent yield-curve inversion significantly reduced the value of WIFIA’s interest rate management features. “Many borrowers appear to have either pursued SRF money or simply waited out market volatility, ultimately choosing municipal bonds as rates in that market became increasingly attractive.”

According to the expert, the shift in appeal highlights the “fundamental problem” that “WIFIA loans are too similar to tax-exempt muni bonds and generally not quite as attractive for borrowers,” and are now becoming a “niche product occupying an increasingly trivial share of US water project financing.”

WIFIA’s shrinking footprint raises the question of whether the Trump administration will find new ways to support low-cost, long-term financing alternatives for investment-grade water infrastructure projects – or simply let market forces determine the fate of the once-popular federal programme.

The abrupt departure of WIFIA director Jorianne Jernberg this week adds to the uncertainty surrounding the programme’s near-term prospects. “This administration is yet to articulate a coherent financing vision for water,” concluded the expert