The investors are worried that increased the risk of non-performing the duties of local authorities in the U.S.. Is increasing evidence that some regions are facing the same difficulties to curb the budget deficit and pension system, as some eurozone countries. The yield on certain municipal bonds related to infrastructure projects has increased compared with that of government treasury bonds because of fears that the difficult financial local authorities will have problems paying their debts, says the Financial Times. Data Release of borrowing costs to local governments (in absolute terms) remain relatively low in historical perspective, thanks to high-liberal monetary policy of the Federal Reserve (U.S. central bank). Any variation in the yield of municipal bonds, however, will be closely monitored by investors, since they assume that the fiscal concerns about the eurozone could be conveyed in the USA. “In the second half there is a risk investors to shift its attention from Europe to the U.S.,” said Robert Parker, senior adviser at Credit Suisse Securities. He said parts of California and individual cities in the states Illinois, Michigan and New York are among the most vulnerable. “Inevitably, concerns among investors about these cities will be reflected in widening the spread on yields of municipal bonds,” he says.
If spreads remain high, the cost of loans to local governments will increase, which in turn will put under pressure and the federal budget. According to the National Conference of State Legislatures several states are facing deficits amounting to 89 billion dollars for fiscal 2011, which for most of them started on July 1st. Municipalities could stop service their debts, and according to the state in which they are located, to declare bankruptcy. If you go there, which currently is not expected, many say they are likely to receive federal aid. The sector of municipal bonds were little known cases of non-performing its obligations. This threat, however, came to the fore because of the problems that some states have to balance the budget after years of lower revenues due to weakening and federal incentives.