A wave of deficit borrowing is headed for the municipal-bond market to close gaping budget holes caused by the coronavirus shutdowns.
New Jersey lawmakers agreed last week to borrow $10 billion to finance half of the state’s estimated budget gap. Illinois plans to sell as much as $5 billion in notes to a municipal facility set up by theFederal Reserve. New York state authorized $11 billion in short-term borrowing that may be refinanced on a long-term basis, if necessary, and New York City is seeking the legislature’s approval to borrow $5 billion.
“It’s pretty simple math,” said Patrick Brett, the head ofCitigroup Inc.’s municipal debt capital markets business. “Hundreds of billions of dollars of deficits opened up really quickly. They’re all not going to get plugged with cuts, they’re all not going to get plugged with tax increases.”
Unlike the federal Government, U.S. states are required to balance their budgets, though they frequently rely on short-term loans to cover temporary shortfalls.
77,255 in U.S.Most new cases today
-5% Change in MSCI World Index of global stocks since Wuhan lockdown, Jan. 23
-1.132 Change in U.S. treasury bond yield since Wuhan lockdown, Jan. 23
4.4% Global GDP Tracker (annualized), June