Excerpt from:
Los Angeles Has Been Hammered by Covid. But Its Muni Bonds Are Holding On. Here’s Why.
By Stephen Kleege - Barron's - Jan. 15, 2021
Moody’s Investors Service in the midst of the first Covid surge in April revised its outlook on the Los Angeles’ Aa2 rating to stable from positive. The city’s $2.6 billion in debt outstanding includes $585 million of general obligation bonds. It issued $1.8 billion of short term tax and revenue anticipation notes to bolster liquidity early in the fiscal year.
Moody’s cited the city’s large and diverse economy, strong management, and relatively modest debt burden.
Investors have stood by the city’s debt. Based on analysis by Ice Data Services, the price of a Municipal Corp. of Los Angeles lease revenue bond maturing in 2037 has risen to $122.427 on Jan. 14, from $120.51 at the beginning of 2020.
“I don’t really see L.A. bonds trading much cheaper than the general market,” says John Mousseau, head of fixed income at Cumberland Advisors. “This is why cities have reserves and why bonds have debt-service reserve funds—for those times. No doubt federal aid will help postinauguration.”
Read the full story at Barron's (paywall): https://www.barrons.com/articles/los-angeles-has-been-hammered-by-covid-but-its-muni-bonds-are-holding-on-heres-why-51610717943
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