As I was saying…

I was wondering when I wrote that post yesterday whether I went too far in my gloomy statements about the likely effects of rising interest rates on municipalities. I guess I wasn’t so far off the mark – from today’s NY Times, by Mary Williams Walsh:

States and cities across the nation are starting to learn what Wall Street already knows: the days of easy money are coming to an end.

Interest rates have been inching up everywhere, sending America’s vast market for municipal bonds, a crucial source of financing for roads, bridges, schools and more, into its steepest decline since the dark days of the financial crisis in 2008.

For one state, Illinois, the higher interest rates will add up to $130 million over the next 25 years — and that is for just one new borrowing. All told, the interest burden of states and localities is likely to grow by many billions, sapping tax dollars that otherwise might have been spent on public services…

The whole piece is online at Dealbook, and worth a read.

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