{"id":270420,"date":"2021-06-09T20:29:00","date_gmt":"2021-06-09T17:29:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/the-feds-covid-era-municipal-lending-program-worked-for-illinois\/"},"modified":"2021-06-09T20:29:00","modified_gmt":"2021-06-09T17:29:00","slug":"the-feds-covid-era-municipal-lending-program-worked-for-illinois","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/the-feds-covid-era-municipal-lending-program-worked-for-illinois\/","title":{"rendered":"#\n  The Fed\u2019s COVID-era municipal lending program worked for Illinois"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a95482275f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a95482275f\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/the-feds-covid-era-municipal-lending-program-worked-for-illinois\/#The_Fed_had_never_stepped_into_the_muni_market_as_lender_of_last_resort_before_the_corona-crisis\" >The Fed had never stepped into the muni market as lender of last resort before the corona-crisis<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/the-feds-covid-era-municipal-lending-program-worked-for-illinois\/#Source_Chicago_Fed\" >Source: Chicago Fed<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/the-feds-covid-era-municipal-lending-program-worked-for-illinois\/#Andrea_Riquier\" >Andrea Riquier<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  The Fed\u2019s COVID-era municipal lending program worked for Illinois<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"The_Fed_had_never_stepped_into_the_muni_market_as_lender_of_last_resort_before_the_corona-crisis\"><\/span>\n  The Fed had never stepped into the muni market as lender of last resort before the corona-crisis<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\">\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000298465\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       As the Federal Reserve takes initial steps toward dialing back its pandemic response programs, its tool for helping municipalities is being judged a success, at least for low-rated Illinois, and a possible addition to future crisis toolkits.<\/p>\n<p> The central bank\u2019s Municipal Liquidity Facility was announced on April 9, 2020, to help cities and states weather what then seemed a burgeoning crisis. With local economies shuttered, tax and fee revenues came to a standstill, even as public health and safety costs were skyrocketing.<\/p>\n<div class=\"paywall\">\n       <strong>Read<\/strong>: The coronavirus crisis is costing states and locals hundreds of billions, analysis finds<\/p>\n<p>Investors were selling municipal bonds at a record pace, and concerns about liquidity \u2014 not solvency \u2014 swirled. <\/p>\n<p>The MLF was meant to be a lender-of-last-resort for local government entities. It was authorized to buy up to $500 billion in short-term notes until the end of 2020. Through the Fed\u2019s<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.newyorkfed.org\/medialibrary\/media\/markets\/municipal-liquidity-facility-pricing\" class=\"icon none\"> <\/a><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.newyorkfed.org\/medialibrary\/media\/markets\/municipal-liquidity-facility-pricing\" class=\"icon none\">pricing for the facility<\/a>, borrowers would pay a \u201cpenalty\u201d \u2014 a fixed interest-rate spread over comparable market rates, determined in part by their credit ratings.<\/p>\n<p>\u201cMarket participants have been viewing the MLF as a backstop because of these terms,\u201d notes <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/fedinprint.org\/item\/fedhle\/92322\" class=\"icon none\">a Chicago Fed paper<\/a> that assesses how well the MLF worked for the state of Illinois, which became the first municipal issuer to sell bonds to the facility.<\/p>\n<p>In the spring of 2020, Illinois was the lowest-rated U.S. state, perched only one notch into investment-grade territory.  Using the MLF, even with the penalty, was a better option than going directly to the credit markets. The state sold $1.2 billion in cash-flow notes in June at a rate more than 100 basis points lower than yields on comparable notes it had issued in the market one month earlier.<\/p>\n<p>\u201cAs of October 30, Illinois muni yields are about 300 bps lower than they were in mid-March,\u201d the Fed report notes. \u201cThe mere ability to issue new debt and the potential savings from debt refinancing are important options for authorities that are trying to overcome 2020 shortfalls and alleviate the burden of projected 2021 budget deficits without reducing essential services.\u201d<\/p>\n<div data-layout=\"inline\n                \" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetMediaIllustration\n            inline\n  article__inset\n          article__inset--type-InsetMediaIllustration\n            article__inset--inline\n  \"><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        renoImageFormat-\n        img-inline\n        article__inset__image\n      \" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<div style=\"padding-bottom:64.99999999999999%;\" data-mobile-ratio=\"64.99999999999999%\" data-layout-ratio=\"64.99999999999999%\" data-subtype=\"photo\" class=\"image-container  responsive-media article__inset__image__image\">\n        <img decoding=\"async\" srcset=\"https:\/\/images.mktw.net\/im-350558?width=140&amp;size=1.5384615384615385 140w,\nhttps:\/\/images.mktw.net\/im-350558?width=540&amp;size=1.5384615384615385 540w,\nhttps:\/\/images.mktw.net\/im-350558?width=620&amp;size=1.5384615384615385 620w,\nhttps:\/\/images.mktw.net\/im-350558?width=700&amp;size=1.5384615384615385 700w,\nhttps:\/\/images.mktw.net\/im-350558?width=860&amp;size=1.5384615384615385 860w,\nhttps:\/\/images.mktw.net\/im-350558?width=1260&amp;size=1.5384615384615385 1260w\" sizes=\"(max-width: 140px) 100px,\n(max-width: 540px) 500px,\n(max-width: 620px) 580px,\n(max-width: 700px) 660px,\n(max-width: 860px) 820px,\n1260px\" src=\"https:\/\/images.mktw.net\/im-350558?width=620&amp;size=1.5384615384615385\" data-enlarge=\"https:\/\/images.mktw.net\/im-350558?width=1260&amp;size=1.5384615384615385\" alt=\"\" title=\" Source: Chicago Fed\"><\/div><figcaption class=\"wsj-article-caption article__inset__image__caption\" itemprop=\"caption\">\n<h4 class=\"wsj-article-caption-content\"><span class=\"ez-toc-section\" id=\"Source_Chicago_Fed\"><\/span> Source: Chicago Fed<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/figcaption><\/figure>\n<\/div>\n<p>       The report shows how each Fed announcement about each successive change to the MLF had an impact on Illinois bond yields.  The figure above shows the spread between three-year bond yields from Illinois and from the U.S. Treasury was reduced by about 220 bps. <\/p>\n<p>\u201cTo illustrate the overall effect of the Fed actions, figure 1 displays in red the projected evolution of the three-year spread in the absence of the Fed announcements. It is evident that in April and May without the safety net of the MLF, the spread would have continued to deteriorate, reaching a peak of 600 bps, and would still be almost 300 bps higher than its pre-Covid levels.\u201d<\/p>\n<p><strong>See: <\/strong>Federal stimulus is a \u2018lifeline\u2019 for communities whacked by the corona-crisis, as scars of 2008 linger<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Andrea Riquier\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Andrea_Riquier\"><\/span>Andrea Riquier<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-748D-E18273468BF0%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# The Fed\u2019s COVID-era municipal lending program worked for Illinois &#8221; The Fed had never stepped into the muni market as lender of last resort before the corona-crisis As the Federal Reserve takes initial steps toward dialing back its pandemic response programs, its tool for helping municipalities is being judged a success, at least for&#8230;<\/p>\n","protected":false},"author":1,"featured_media":270421,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-270420","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/270420","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=270420"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/270420\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/270421"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=270420"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=270420"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=270420"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}