News Story

By Shruti Singh and Aashna Shah

February 6, 2026 at 12:40 PM CST

The second-largest transit system in the US is benefiting from municipal bond investors looking to put billions of dollars to work.

The Chicago Transit Authority sold about $530 million in sales-tax-backed bonds on Thursday. Proceeds from the deal will finance projects such as the Red Line extension and refund old debt for savings. It comes as the Trump administration threatens to freeze or withdraw funding for transit systems and projects in Chicago and other major cities if they fail to comply with the administration’s policies.

Read More: NY-NJ Hudson Tunnel to Be Halted After Trump Blocked Funding

Inflows into the muni market, subdued supply and CTA’s higher rating with greater revenue made investors more “comfortable” and set the agency apart from other issuers in the region, said Dan Solender, head of municipal investments at Lord Abbett & Co.

Reinvestment Dollars

Investors are flush with cash searching for municipal assets to buy

A “big slug” of money looking to be reinvested into the municipal market bolstered demand, said Sweta Singh, a portfolio manager at City Different Investments.

Investors have about $46 billion in principal and interest payments available to funnel back into the market in February, one of the highest monthly amounts this year, according to Bloomberg Intelligence estimates. That demand has been outweighing supply so far this year.

Read More: Munis Beating Treasuries in January as Supply Trails Demand

While analysts on average have projected muni long-term issuance of about $600 billion this year, which would top last year’s record, volume so far has trailed 2025, according to data compiled by Bloomberg. So far in 2026, state and local governments have sold $43.6 billion in long-term debt, 4.6% below the same period a year ago.

Issuance “has been a little lighter than people had expected,” said Ryan Ciavarelli, senior vice president for credit research at Belle Haven Investments.

Singh added that Moody’s Ratings’ recent credit upgrade of CTA also helped the bond sale. The company said in a December report that the raise was rooted in the state’s approval of a revenue increase for transit in the region and that it expects the new funding to exceed the budget shortfall the transit authority previously projected.

Late last year, Illinois lawmakers approved a package for Northeast Illinois with $1.2 billion in new funding. Before the additional revenue was approved, the Regional Transportation Authority had projected that Chicago area transit systems could face budget gaps growing to $834 million in 2027 and $937 million in 2028.

The package “provided financial stability for public transit in the region that is clearly being recognized in the market,” said a CTA spokesperson in an email.

At a time when muni valuations are seen as rich, the CTA deal offered investors higher yields than some other recent debt sales, Ciavarelli said.

Spreads on some maturities for the deal tightened from preliminary pricing, according to the transit authority. CTA sold bonds maturing 2041 with a 5% coupon for a 3.68% yield, 38 basis points above benchmark securities, data compiled by Bloomberg show.

“The deal was oversubscribed, which allowed for us to be aggressive on a repricing,” said the spokesperson for CTA.