US bond issues fall 25% as cities, states cut spending

Investors forced to bid on lower-quality credits

[WASHINGTON] US cities and states are leery of borrowing more money despite near-record low interest rates, forcing bond funds to scour for investments and boosting returns on existing debt.

The drought in issuance is also slowing city and state capital projects and threatens to disrupt the summer high season for bond buying.

So far this year, sales are running 25.4 per cent below the same period in 2013, according to preliminary Thomson Reuters data. May's issuance, US$22.41 billion of bonds sold in 907 deals, was the lowest for the month in three years and the smallest since January, when only US$18.17 billion in bonds came to market.

The paltry pace of issuance has investors competing to get...

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