The next economic downturn in the U.S. is likely to take place in 2020, according to participants in a live market survey at The Bond Buyer's California Public Finance conference in Carlsbad, Calif.

When asked on Tuesday about the timing of the next recession, 39% picked 2020, while 31% chose 2019, 19% said after 2022 and 12% said in 2018.

Jessica Matsumori, Senior Director at S&P Global Ratings, moderated the panel, which included Natalie Brill, the city of Los Angeles’ Chief of Debt Management; David Brodsly, Managing Director at KNN Public Finance; P. Scott Nagelson, Managing Director at U.S. Bancorp Investments; Nat Singer, senior managing director at Swap Financial Group; and Jason Sisney, state of California’s Chief Deputy Legislative Analyst.

The Bond Buyer's John Hallacy introduces the live market survey panel
The Bond Buyer's John Hallacy introduces the live market survey panel Chip Barnett

“As an issuer, one of the indicators always is ‘Are issuers willing to issue new money?’ And there has not been a great deal of new money in the market. There have been a lot of refundings and I think that shows a reluctance of where cities think the economy is going,” Brill said, who added that she saw many cities and states replenishing their rainy day funds. “I think that’s an indicator of what municipalities think where the economy is going.”

Participants also chimed in on a possible future replacement for the LIBOR index.

A Treasury bill index would be the most likely LIBOR replacement, almost half of the voters said.

Of those voting, 43% went for a Treasury bill index, 28% for the broad Treasury repo fixed-rate index (BTRF), 19% for an index based on a federal funds rate, and 10% for a sterling overnight index average (SONIA).

When asked about the effect the Municipal Advisor rule has had on the municipal bond market, 48% said that it has had no impact, 32% said it has made the market worse off while 19% said thought it was a good thing.

Turning to local events in California, 72% said the state’s economic condition would weaken after the term of Gov. Jerry Brown runs out while 21% said it would stay the same and 8% said it would strengthen.

When asked if the state would issue new transportation bonds based on the new gas tax, 58% said yes and 42% said no.

S&P Global Ratings sponsored the survey.

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Chip Barnett

Chip Barnett

Chip Barnett is a journalist with more than 40 years of experience. Barnett is currently Senior Market Reporter for The Bond Buyer.