Credit Deteriorating, Moody’s Lowers State Outlook to “Negative”

  • The Fed announced adjustments to its $500 billion Municipal Liquidity Facility (MLF), highlighted by city and county eligibility expansions. Some additional elements about the process and requirements were also provided.

  • Today, Moody’s lowered their U.S. State sector outlook from “Stable” to “Negative.”

  • The Center on Budget and Policy Priorities (CBPP) increased their forecast of U.S. state budget shortfalls from $500 billion to $650 billion.

  • House Speaker Nancy Pelosi made clear this week that the Democrats are pushing for $1 trillion of aid for state and local governments. There is resistance from Republicans, but we need to wait to see how negotiations play out before we can identify the level of political risk that exists.

  • S&P Global assigned a “Negative” outlook to most of their public and private U.S. higher-ed institutions this week because of the COVID-19 impact.

  • We are seeing evidence of weakening demand for narrow security pledges in the higher-ed sector. We saw only very limited interest in a public higher-ed institution that brought competitive issues this week.

  • We believe there is legislation that is being considered that would broaden the reach of the Federal Home Loan Banks, potentially allowing them to back non-housing bonds.

  • A bipartisan State and Municipal Aid for Recovery Transition (SMART) proposal is being championed by Senators Menendez (D-N.J.) and Cassidy, M.D. (R-La.). We expect advocacy to continue related to this effort, and perhaps in the near term (even next week), we may begin to hear more specifics.

  • $1.255 billion of investment dollars flowed out of municipal funds this week, according to Lipper data.

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