Amy Resnick's Bond Bits: A Point of Interest
States and localities have increasingly used forms of variable-rate debt in their issuance, but now, as interest rates rise, that could land them in trouble.
States and localities have increasingly used forms of variable-rate debt in their issuance, but now, as interest rates rise, that could land them in trouble. Governments that budgeted their debt service payments assuming January's rates--or the still-lower rates of last July--could find themselves short. While rates in the short-term market are still well below those for long-term, fixed-rate debt, predictions are for continued Federal Reserve Board hikes this year. In the first half of the year, short-term rates in the muni market were up 50 basis points to just over 1.6 percent, and forecasters see those rates nearing 4 percent by year's end.
While variable-rate debt is still a fraction of the municipal bond market, some governments, like some consumers, vastly increased their exposure to this part of the market while rates were low.
Join the Discussion
After you comment, click Post. You can enter an anonymous Display Name or connect to a social profile.
LATEST FINANCE HEADLINES
30 Road Projects Halted in Montana Due to Budget Shortfall1 day ago
The Week in Public Finance: Federal Budget Chaos, a Bankruptcy Win and Pension Portfolios1 day ago
Businesses: Anti-LGBT Bills Could Cost Texas $8.5 Billion and More Than 100,000 Jobs2 days ago
What We Don't Know About Trump's Carrier Deal (and Most States' Business Deals)2 days ago
Most States Are Combating Climate Change and Growing Their Economies2 days ago
FEMA's Plan to Make States Pay More for Disasters2 days ago