Munis Face Elevated Default Risk for Years, Barclays Says

The amount of state and local government debt expected to default is likely to stay elevated in the coming years, showcasing the lasting effects the coronavirus pandemic will have on some corners of the $3.9 trillion municipal bond market.

High-yield muni default rates are expected to hover between 1% and 3% in 2021, according to a research note analysts at Barclays Plc published Thursday. The group said that rate may remain higher for coming years because distress in municipals tends to lag boarder credit markets.

“Unlike corporates, muni defaults tend to have a much longer lag from economic downturns, with ...