Hospital Munis Lag as Trump’s Funding Cuts Spark Investor Angst

Bond investors have been increasingly wary of debt sold by US hospitals, and they see looming cuts to federal health-care funding as new pain points for an industry that’s just starting to recover from pandemic stress.

Hospital debt is one of the worst-performing municipal-bond market sectors so far this year, with its 3.44% gain lagging the overall investment-grade basket by about 0.6 percentage point, according to data compiled by Bloomberg.

Investors have been getting nervous about the health-care sector since this summer, when President Donald Trump’s signature economic package cut about $1 trillion in funding to Medicaid, the public ...