Fabian expects hospitals to struggle throughout 2023. He pointed to Sparrow Obligated Group, a newly impaired hospital borrower seeking a bondholder waiver for its debt service coverage rate test, as an example of recent distress. Hospitals wrestling with covenant problems are “becoming a hallmark of the late pandemic period,” Matt Fabian, partner at independent research firm Municipal Market Analytics, said in a Feb. High-yield municipal bonds have returned 4.8% year-to-date, roughly two percentage points more than the broader market, according to data compiled by Bloomberg. So far this year, the outlook hasn’t dissuaded investors.
The city near Philadelphia filed in November because of a massive debt to its employee pension funds. “These don’t just happen overnight.”ĭespite the anticipated uptick in defaults, it’s been roughly three months since the last Chapter 9 bankruptcy petition by Chester, Pennsylvania, about a month longer than the average length of 52 days between filings since 1982, BofA said.
HIGH YIELD MUNICIPAL BOND DEFAULT RATE FREE
“Overall things are going to stay strong, but things have been so slow after the stimulus, it’s hard to stay that low for that long,” said Daniel Solender, a partner and director of tax free fixed income for Lord Abbett & Co. Most of the credit pain will likely be concentrated among smaller issues. The forecast reflects a toughening financial outlook for higher yielding debt that until recently had benefited from an extended stretch of low interest rates, and in some sectors, stimulus money. Almost all of the defaults were unrated securities in the not-for-profit, nursing home and hospital industries. First-time payment defaults in January rose 122% year-over-year to $611 million, marking the third highest month since 2019, the note said. Muni-bond defaults are forecast to total between $1.7 billion and $2.1 billion in 2023, according to a research note the bank published Friday. Most of the distress will be concentrated in riskier sectors like nursing homes and hospitals. (Bloomberg) - Expect more defaults in the $4 trillion municipal-bond market this year, Bank of America Corp.
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