Congress is going to consider another round of funding for states as part of the next phase of spending for the coronavirus. "Sen. McConnell and other Republicans in the Senate are concerned that Blue States are gearing up to offload their chronic budget shortfalls and yawning public pension program deficits, which have nothing to do with the virus, on the federal government," notes Stephen Stanley, chief economist at Amherst Pierpont, "This is going to be a massive food fight ...
"We've seen the liquidity impact to financial markets, and now you're going to see the economic impact. In munis, it takes awhile to play out," said Curtis Erickson, head of capital markets at Preston Hollow Capital. "Stuff we see now is going to start to hit municipal budgets three months from now...It's going to be a difficult process to get states and locals back to square on their finances.
McConnell's comment added some jitters to a market that had become more stable, since reaching its high yields March 22. The Fed's liquidity program and facility for municipal bonds helped bring in yields and calm the market though the secondary market is still soft. The market sold off just before McConnel's comment last week, but it continued to selloff.
to members of Congress earlier this month, asking for $40 billion, including $10 million to shore up the state's underfunded pension fund. In a tweet Monday, Trump questioned why tax payers should bail out poorly run states, like Illinios, when most states do not need help. "The market is holding up, but I'm not sure what it is. It's being supported by the technicals, by the fact fund flows have not continued to go out," said Peter Bianchini, Preston Hollow executive director. "It's not backed by analysis. We can kind of go sector-by-sector and credit-by-credit and talk about all the uncertainties. These are governments that provide essential services. They generally collect revenue streams that people are obligated to pay..
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