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
LATEST FINANCE HEADLINES
Renewable Energy's Rise Hurting Utilities16 hours ago
New Yorkers to Vote on $2 Billion School Spending Plan18 hours ago
Exit Interview with AGA's Relmond Van Daniker18 hours ago
The Elections Where Soda Is One of the Biggest Issues23 hours ago
Pensions Focus of Detroit Bankruptcy Case's Closing Arguments2 days ago
The City Where $250 in Unpaid Taxes Can Cost You Your House2 days ago