Municipal Bond Defaults Rise to Highest Level in Years

August 19, 2020

Local governments have had their finances upended by the coronavirus, and The Wall Street Journal now reports that many municipalities are struggling to service their debts. Revenues from universities, convention centers, and tourism have all been battered, resulting in some insolvencies. As of July 31, there have been a total of 50 municipal defaults, according to Municipal Market Analysis. This is the highest number of defaults since 2011.

Despite the increase in defaults, the inflows have been strong. Investors have put about $28 billion back into the muni market since April. This is roughly 60% of the amount pulled out during the pandemic, according to Refinitiv. At the same time, new issuances are down nearly 2% this year, as many municipalities seem hesitant to issue new debt.

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