Fear Revives Muni-Bond Insurance Business From Decade-Long Slump


(Bloomberg) — As the coronavirus pandemic rips through the finances of state and local governments, municipal-bond insurers are busier than they’ve been in years.

Since early May, about 10% of new bond sales have been offered with insurance, nearly double the average since 2012, according to data compiled by Bloomberg. The last time the market saw back-to back-months of double digit insurance rates was in July and August of 2009.

State and local government bonds sold with insurance was once a mainstay in the $3.9 trillion market. But the industry nearly collapsed in the financial crisis, when the companies had their credit ratings slashed because of losses tied to toxic mortgage securities, leaving only about 5% of new sales carrying insurance since then.

“Covid-19 has had tectonic shifts in the market psychology and fear of further credit deterioration,” said Grant Dewey, head of municipal capital markets at Build America Mutual,

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