The Bond Buyer
State credits stable in 2020 outlook
By Sarah Wynn – December 04, 2019
Analysts predict states will be in stable condition this coming year with continued revenue growth, leading to more willingness to issue debt.
State revenues will continue to climb in fiscal 2020, though at a more moderate pace as national economic growth slows, according to a Moody’s Investor Service report released this week. Overall tax revenues will increase by about 4% in 2020, the agency projects.
States also have plans to spend more on education and contribute to record-high rainy day fund balances, analysts said. States have contributed more to rainy day funds recently, in part due to unexpectedly strong revenue growth.
If a recession were to hit and a state issued a lot of debt, pay-as-you-go can help them delay projects and decide to issue debt later. .
Issuers have gone out to bond more since interest rates have continued to decrease over the years, leading issuers to possibly think that this may be the last time interest rates will be this low, said Patricia Healy, senior vice president of research and portfolio manager at Cumberland Advisors.
“Interest rates are still low,” Healy said. “They got so low, that issuers decided to go to market thinking that maybe this is the last low.”
However, an economic downturn could lead to less issuance.
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