Bond Sales Get Too Expensive Just When Public Pensions Need Them
- Municipal pension debt sales fall 70% from 2021 pace
- Returns hit by stock drop as rate rises make borrowing costly
U.S. bonds
Photographer: Ron Antonelli//Bloomberg
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US cities and states have backed away from selling bonds to cover pension obligations because of rising borrowing costs, increasing their long-term burden of unfunded pension gaps.
So far this year, municipal governments sold just $2.7 billion of bonds in which proceeds would at least in part help finance retirement systems, an almost 70% drop from the same period a year ago, according to data compiled by Bloomberg. At the same time, an index of 10-year, AAA benchmark yields has risen to about 2.5% from near 1% in January.