Low interest rates, tight government budgets provide backdrop for muni bond boom
Municipal-bond issuance in 2020 was the highest in a decade, reflecting the collapse of interest rates and the increased costs cities and state governments are facing from Covid-19 shutdowns.
Bonds for new projects reached $252 billion last year, according to Refinitiv, a small increase from the previous year and the highest since 2010, when a federal incentive program helped push the total above $270 billion. The new borrowing drove the total amount of outstanding muni debt above $3.9 trillion for the first time since 2013, according to the Federal Reserve data from the third quarter.
The muni-issuance boom is unlikely to abate as cash-strapped local governments struggle to make up for ongoing Covid-19-related shortfalls and pay back old debts. Before the pandemic, many city and state governments had already been operating on tight budgets.
The Wall Street Journal
By Heather Gillers
Jan. 12, 2021 5:30 am ET