Illinois Becomes First to Tap Fed Loans After Yields Surge (1)

Illinois, which has faced escalating penalties in the bond market as the coronavirus batters its finances, is poised to become the first state to borrow from the Federal Reserve’s $500 billion lifeline for local governments.

The state is planning to borrow $1.2 billion from the central bank for one-year to cope with revenue losses brought on by the economic shutdowns caused by the pandemic and the delay of its annual tax-filing deadline.

The step comes after Illinois last month put off a planned auction of such short-term debt as the interest rates demanded by investors soared amid concern it could ...