Skip to content
Subscriber Only

Soaring Bond Yields Drive States, Cities to Buy Back Own Debt

  • Ohio, Pennsylvania buy hospital debt after market selloff
  • Yields on variable-rate munis have fallen but still above norm
Photographer: Luke Sharrett/Bloomberg

Investors’ swift retreat from a key corner of the municipal-bond market is causing state and local governments to take matters into their own hands.

Governments are wading into the variable-rate market to drive down borrowing costs on the bonds with interest rates that reset daily or weekly. The municipal-bond market’s steep sell-off last month led yields on the debt to surge as money managers dumped them to raise cash, costing municipalities as they were facing higher expenses from battling the spread of the coronavirus.