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
Pension Cuts Win Federal Court Support in Chattanooga3 days ago
California Pension System Paid Billions in Private Equity Bonuses4 days ago
3 Things the New Tax Incentive Disclosures Rule Won't Reveal4 days ago
Planned Parenthood Adds Texas to List of States It's Suing4 days ago
Without a Budget, Pennsylvanians May Not Have Much to Be Thankful for This Year4 days ago
Can a City Tax Medical Marijuana?4 days ago