With the 2026 midterm elections approaching, volatility remains the dominant theme across markets. The conflict with Iran, energy-driven inflation and a more hawkish Federal Reserve have pushed interest rates through sharp swings this year, shaping the borrowing environment for municipal issuers heading into November.
At an elevated view, the FY 2025 medians show a sector that is holding steady in many ways but faces significant areas of concern that are difficult to alleviate. Enrollment has stabilized, but long-term demographic challenges continue to threaten institutions’ footholds and competitive positions. Inflationary pressures, tuition discount growth, and uncertainties around state and federal support continue to pressure management teams to operate nimbly and under substantial constraints to keep their institutions running viably and successfully.
In mid-June, our entire team gathered in Minnesota for our annual meeting – a tradition that has long served as both a strategic touchpoint and an opportunity to live out our core values. This year’s gathering was no exception, and I could not be more grateful for my colleagues who make our team an extraordinary group.
Both taxable and tax-exempt rates were volatile throughout the first quarter of 2026, as geopolitical developments disrupted what had been a constructive start to the year. Municipal bond returns were comfortably in the green through January and February, fund flows were trending positively, and market participants were feeling cautiously optimistic about a resumption of Fed easing.
Tax-exempt entities, including municipalities, universities, healthcare systems, and nonprofits, often carry outstanding debt through bonds issued in the public capital markets. As market conditions evolve and interest rates fluctuate, opportunities emerge to optimize debt structures and reduce long-term borrowing costs. One increasingly valuable strategy is the tax-exempt bond tender, which allows borrowers to repurchase their outstanding bonds from the secondary market and refinance that purchase through the issuance of new tax-exempt debt.
Public-Private Partnerships (“P3s”) have become a commonly considered method of funding, developing, and often operating much-needed capital projects in higher education. The principal motivations for higher education institutions to look to private sector partners are to share risks, provide financing, and deliver projects more efficiently and timely. Institutions considering a P3 path should carefully consider the trade-offs to determine whether a P3 truly aligns with their strategic objectives and if it is the most appropriate method of financing a particular project in the short- and long run.
Market participants have had much to ponder as they navigate through this period – how many rate cuts (if any) are coming this year? How will government policy, particularly tax reform, impact markets?
In the ever-evolving landscape of higher education, institutions face mounting pressure to maintain and modernize their campuses with limited financial resources. From addressing aging infrastructure to expanding facilities for future growth, campus improvement is an essential but costly priority
The major credit rating agencies shared their 2025 outlook reports for higher education in December of 2024. Moody’s Investor Service assigned a “Stable” outlook for the sector, highlighting a steady financial environment for the sector due, in part, to waning pressure from inflation and modest growth for revenue streams
The beginning of the new year marks a new start for many of us. New year’s resolutions, new goals and aspirations, perhaps even a commitment to stay the course on a personal or professional mission. It is the way of the world to set new milestones for ourselves as the calendar turns over from one year to the next. For the Blue Rose team, our commitment is unwavering to remain steady, trusted advisors who provide expert advice amid upside-down yield curves, changing tax codes, interest rate volatility and, possibly, more market surprises than we may wish to think about in 2025.
