Fed to Lower Rates for Cities, States Seeking Short-Term Loans -- Update
By Nick Timiraos
The Federal Reserve said Tuesday it would reduce the rates it
charges cities and states seeking short-term loans from an
emergency lending program.
Changes to the program must be agreed upon by the Treasury
Department, which has approved $35 billion to cover losses on up to
$500 billion in loans extended by the Fed.
Municipal bond strategists and some Democratic lawmakers have
expressed disappointment in recent weeks over the degree to which
the Fed positioned the program as a backstop.
With Tuesday's changes, the Fed will reduce by 0.5 percentage
point the interest-rate spread on tax-exempt notes, and it will
also reduce the amount by which rates for taxable notes are
adjusted relative to tax-exempt notes.
The Fed has repeatedly broadened the number of local governments
eligible for the lending program to allow more than 300 municipal
issuers. So far, the Fed has purchased only one such note.
The state of Illinois sold $1.2 billion of debt to the central
bank in June at a rate more than 1 percentage point below the rate
at which it was previously able to access markets in May.
Write to Nick Timiraos at firstname.lastname@example.org
(END) Dow Jones Newswires
August 11, 2020 17:36 ET (21:36 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.