Municipal bond issuance is at a 10-year high, reports The Wall Street Journal earlier this week. And Wall Street’s paper of record reached out to Aquila portfolio manager Chris Johns for his insights on the boom.
Muni bond issuance totaled $474 billion in 2020 as state and local governments took advantage of low interest rates to raise capital while revenue streams continued to decline due to pandemic pressures. Taxable issuance was up for the year as governments took advantage of the ability to fill budget gaps with those funds, and lower-rated borrowers caught a break as risk tolerance shifted with the search for yield.
“Alongside the drop in yields, another factor driving the borrowing was that yield-hungry investors were willing to accept less interest from lower-rated borrowers relative to what they demanded from higher-rated ones” – Chris Johns
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