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
New York Joins Flow of States Making Tampons Tax-Free2 days ago
The Week in Public Finance: Hot Munis, Cooling Off Creditors and Warming Up to Facebook2 days ago
Washington Superintendent Sues 7 School Districts and the State4 days ago
Pennsylvania Hikes Cigarette Tax But Stays Last-Standing State With Tax-Free Cigars4 days ago
Is Kurt Summers the Future of Chicago Politics?4 days ago
Chicago's 2016 Olympics Bid Leaves Pricey Legacy 7 Years Later5 days ago