US public pension deficits driving muni yields

It is common knowledge that US public schemes are in a precarious situation, but the scale of their funding deficit is less so because of the favourable accounting rules that allow liabilities to be discounted using the growth of a scheme’s asset portfolio. New research has shone a market-consistent light on jusat how bad the situation is – and this is spooking muni investors. Laurie Carver reports

Nearing the end of his seven years as governor of the Golden State, Arnold Schwarzenegger proved he was no "economic girly man" by raising some $14 billion (£8.8 billion) for his troubled state's budget during a sharp downturn in the market for US public debt.

The vast quantities of US public debt issuance in the years since the financial crisis began in 2008 – $160 billion in the past 19 months alone – have been issued to the same relatively small set of investors, mainly funds trading on