CHICAGO (Reuters) – Investors in the U.S. municipal bond market are growing increasingly worried over the ability of states, cities and other debt issuers to weather the financial fallout of the COVID-19 pandemic caused by the novel coronavirus.
FILE PHOTO: A 3D-printed coronavirus model is seen in front of a U.S. flag on display in this illustration taken March 25, 2020. REUTERS/Dado Ruvic/Illustration/File Photo
Those concerns are creeping in to the $3.8 trillion market, where bond yields have whipsawed in recent weeks.
“Most of the activity is still being driven by liquidity factors, but credit quality will rise in importance the longer the social distancing policies remain in place,” said Tom Kozlik, head of municipal strategy and credit at Hilltop Securities Inc.
Large parts of the nation have shut down in an effort to stop the virus’ spread, with some states extending stay-at-home orders until the end of April. Sales, income and other taxes are expected to drop as…