| 来源类型 | Working Paper
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| 规范类型 | 报告
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| DOI | 10.3386/w28437
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| 来源ID | Working Paper 28437
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| How the New Fed Municipal Bond Facility Capped Muni-Treasury Yield Spreads in the Covid-19 Recession |
| Michael D. Bordo; John V. Duca
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| 发表日期 | 2021-02-08
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| 出版年 | 2021
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| 语种 | 英语
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| 摘要 | For over two centuries, the municipal bond market has been a source of systemic risk, which returned early in the Covid-19 downturn when borrowing from securities markets became costly for many private and public entities, and some found it difficult to borrow at all. Indeed, just before the Fed announced its unprecedented intervention into the municipal (muni) bond market, spreads of muni over Treasury yields rose in line with the unemployment rate and appeared headed to levels not seen since the Great Depression, when real municipal gross investment plunged 35 percent below 1929 levels. To prevent a repeat, the Fed created the Municipal Liquidity Facility (MLF) to purchase newly issued, (near) investment grade state and local government bonds at normal ratings-based interest rate spreads over Treasury bonds plus a fee of 100 basis points, later reduced to 50 basis points. Despite a modest take-up, the MLF has effectively capped muni spreads at near normal levels plus the Fed fee and limited the extent to which interest rate spreads could have amplified the impact of the Covid pandemic. To establish the MLF the Fed needed Treasury indemnification against default losses. There are concerns about whether the creation of the MLF could undermine the efficiency of the bond market if the facility lasts too long and could induce moral hazard among borrowers. How the MLF will be unwound will affect these downside aspects and help answer the question whether the program’s benefits exceed its costs. |
| 主题 | Macroeconomics
; Money and Interest Rates
; Monetary Policy
; Financial Economics
; Financial Institutions
; COVID-19
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| URL | https://www.nber.org/papers/w28437
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| 来源智库 | National Bureau of Economic Research (United States)
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| 引用统计 |
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| 资源类型 | 智库出版物
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| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/586110
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推荐引用方式
GB/T 7714 |
Michael D. Bordo,John V. Duca. How the New Fed Municipal Bond Facility Capped Muni-Treasury Yield Spreads in the Covid-19 Recession. 2021.
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文件名：
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w28437.pdf
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格式：
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Adobe PDF
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