Fed Announces Reduced Borrowing Costs for Municipal Issuers
- Fed is lowering spread on tax-exempt bonds by 50 basis points
- Terms of the emergency Fed lending program had been criticized
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The Federal Reserve said Tuesday it would reduce borrowing costs in its Municipal Liquidity Facility, an emergency lending program for state and local government issuers launched in response to the coronavirus pandemic.
“The revised pricing reduces the interest-rate spread on tax-exempt notes for each credit rating category by 50 basis points and reduces the amount by which the interest rate for taxable notes is adjusted relative to tax-exempt notes,” the Fed said in a statement. “Today’s changes will ensure the MLF continues to provide an effective backstop to assist U.S. states and local governments as they weather the pandemic.”