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    How Zika Could Infect the Municipal Bond Market

    Even if an area has no cases of the virus, it could feel a financial impact.
    BY  MAY 27, 2016

    When you walk through Atlanta's Hartsfield-Jackson International Airport, it’s hard to ignore the solemn warnings that the city could be an entry point for the Zika virus into the United States.

    Everywhere, large signs picturing a menacing mosquito warn travelers: “Don’t let this bad bug bite you.” Other signs warn pregnant travelers about a Zika health advisory. Last month, airport concessionaires began selling insect repellent with the recommended level of DEET to keep mosquitoes at bay.

    But there are also financial implications of Atlanta’s status as a gateway to Central and South American travel, and for other cities like it. According to a new report by the investment firm, Loop Capital Markets, the Zika virus could make it more expensive for some municipalities to borrow money.

    That's because similar to natural disasters, a virus outbreak has the potential to overwhelm local and state health departments. In 2005, Hurricane Katrina "demonstrated the enormous capacity of governments to botch disaster relief efforts,” said Chris Mier, the report's author. Since then, research has shown that a region's susceptibility to disasters now plays a role in their municipal interest rates. For example, a study of California's more earthquake-prone cities found that they paid a higher interest rate on their bonds following Hurricane Katrina.

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