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Case for Fed Rescue of Muni Market Builds With Rout Returning

  • Yields jump almost 75 basis points this week as prices slide
  • New deals largely shelved, showing limited access to market
The Nation's Capital Before Senate Debates Impeachment Of President Trump
Photographer: Andrew Harrer/Bloomberg

In the past 48 hours, the $3.9 trillion municipal-bond market is making the case for the Federal Reserve to use its new powers to wade in, whether buyers want it to or not.

That’s because the market where states and local governments raise cash is veering back toward the dysfunction that gripped it last month. Bond prices have dropped sharply, sending yields on 30-year debt surging by nearly 0.75 percentage point since Monday morning. Big bond deals are in limbo, effectively shutting off market access. Frightened investors are pulling out.