We opined in this space back in March of last year that if you wanted to know what lessons the unfolding crisis at the time in Greece held for the United States, the place to look wasn’t the federal level, it was the state level. Greek stories, after all, I said, always have something to teach us.
That’s becoming more apparent. Be sure to get a gander at the story at the top of page one in today’s Wall Street Journal, New Hit to Strapped States. The market for municipal bonds is getting tighter for all manner of issuers, hospitals, improvement authorities, schools.
With myriad agencies having to refinance tens of billions in bonds this year, it’s creating another headache for the states, which have enough of them to begin with. This isn’t just a bad rabbit hole to go down. It’s a nuclear rabbit hole.
It’s been a bad week for muni bonds, with the highest profile misfortune, the one that really got this whole mess into the public eye, this week coming from my own Garden State. Given that New Jersey sprouts more “improvement authorities” than bad reality shows, this is no surprise.
The New Jersey Economic Development Authority was forced this week to scale back a bond offering and offer higher yields due to weak demand. The authority cited the weather, but many cited Chris Christie, because just before the bond offering, the governor said rising healthcare costs might bankrupt the state.
Bad timing, that. But these problems aren’t going away, in fact they are likely to only grow.