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Municipal Debt Markets and the COVID-19 Pandemic

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Abstract

In March, with the outbreak of the COVID-19 pandemic in the United States, the market for municipal securities was severely stressed: mutual fund redemptions sparked unprecedented selling of municipal securities, yields increased sharply, and issuance dried up. In this post, we describe the evolution of municipal bond market conditions since the onset of the COVID-19 crisis. We show that conditions in municipal markets have improved significantly, in part a result of the announcement and implementation of several Federal Reserve facilities. Yields have decreased substantially, mutual funds have received significant inflows, and issuance has rebounded. These improvements in municipal market conditions help ensure that state and local governments have better access to funding for critical capital investments.

Suggested Citation

  • , 2020. "Municipal Debt Markets and the COVID-19 Pandemic," Liberty Street Economics 20200629, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednls:88240
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    More about this item

    Keywords

    state and local governments; municipal debt; MLF; municipal debt markets; COVID-19;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H0 - Public Economics - - General

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