Mittwoch, 12. Januar 2011

2011 decisive for indebted US states

The FT runs article about indebted US states and municipalities.

(click to enhance the graph)

The huge USD 3,000bn municipal bond market is heading for some difficult times this year.
Although the US economy is recovering, the financial situation is likely to worsen because federal assistance will be reduced significantly, revenue from property taxes is shrinking, and interest rates due to their worsening credit standing are increasing.
In General, it is expected that municipalities will cut spending drastically, manage their finances more rigidly  in order to meet their debt obligation and to avoid default. Nevertheless we will see some defaults  probably in Illinois first where the financial situation is most precarious and funding the budget is depending on selling public debt. Bonds of Illinois have already the highest credit spreads.

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