The Affect Of Covid On Defaults In The Municipal Bond Market

The economic consequences of the Covid pandemic have been extensive and are still playing out in the ongoing Federal Reserve monetary policy which is dealing with the inflation induced by the fiscal policies enacted by Washington to counter the pandemic. The economic consequences of the lockdown policies, the supply chain disruptions and the contact restrictions. These policies had immediate severe effects on numerous segments of the municipal bond market beginning with hotels, convention and sports facilities, and retirement facilities.

When I say the affect was immediate and severe, note that the defaults in 2020 jumped from 32 on $1.2 billion to 68 on $4.4 billion, a 267% increase. In addition, the number of distressed issues, issues which are dipping into reserves to make scheduled debt payments, rose from 12 on $337 million to 39 on $3.4 million, a 909% increase. The areas having the greatest impact can be seen from the following table: