Hurricane Milton is charging towards southern Florida in the United States with wind speeds of over 200 kilometers per hour, forcing a large-scale evacuation of residents in coastal towns along the Gulf of Mexico, with billions of dollars in local municipal debt facing the risk of devaluation.
The National Weather Service (NWS) has stated that over 12 million people in Florida are under threat from tornadoes, hail, and strong winds. According to the Associated Press, approximately 6 million Florida residents have received mandatory evacuation orders, requiring them to leave their counties of residence.
Recent reports indicate that the Tampa Bay area of Florida, home to more than 3.3 million people, will face significant threats from Milton. As previously mentioned by Wall Street Journal, after Milton intensified to a Category 5 hurricane on Monday, meteorological departments warned that if it maintained its strength, the central Tampa area, located along the Gulf of Mexico, would experience the worst storm in over 100 years.
Subsequently, Milton's strength has somewhat diminished. On Tuesday evening, Eastern Time, Milton's winds regained the destructive force of a Category 5 hurricane, with maximum sustained winds exceeding 160 miles per hour. By Wednesday afternoon, it was downgraded to a Category 3 hurricane, and by 4 p.m. Eastern Time on Wednesday, the maximum wind strength was 125 miles (201 kilometers) per hour.
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Tampa's Mayor, Jane Castor, stated on Wednesday morning that Tampa Bay has never been directly hit by a major hurricane in over 100 years, and this time would be the first, warning local residents to be prepared for immediate evacuation.
The National Hurricane Center (NHC) emphasized that due to the potential "wavering" path of Milton, it is currently uncertain where the storm's center will make landfall on Wednesday evening, but the entire Tampa Bay area and the southern region face severe danger. Milton is expected to make landfall along the Gulf Coast of central Florida that night and then quickly move towards the Atlantic Ocean.
Analysts believe that this year, due to a surge in population and the need to update infrastructure, Florida's borrowers have flocked to the state and local government bond markets, and Hurricane Milton's invasion directly threatens Florida's municipal bonds.
According to estimates by Bloomberg Industry Research (BI), the total scale of Florida municipal debt facing the most severe threat from Milton is about $30 billion, including bonds issued to finance hospitals, utility systems, and nursing homes. The highest proportion, about $9.9 billion in municipal bonds, is related to healthcare and elderly living, followed by $5.6 billion in tax bonds and government grant-supported bonds, $4.7 billion in bonds supporting education and cultural institutions, and approximately $4 billion in bonds supporting public utilities. Bonds related to airports and land development each amount to $2.7 billion.
Eric Kazatsky, Senior U.S. Municipal Bond Strategist at Bloomberg Industry Research, stated that in the worst-case scenario, the entire municipal bond sector could experience asset devaluation, with bonds that already have limited financial cushions facing particularly large devaluations.
Earlier this week, other analyses predicted that the impact of the hurricane would be reflected as soon as Thursday's initial jobless claims data and would affect the non-farm employment data for October, released on November 1st, just a few days before the U.S. election on November 5th.Due to the evacuation of residents and closure of businesses in some areas affected by the hurricane, some workers who should have been counted in the employed population may not work at all during the week. Moreover, in areas of North Carolina hit by Hurricane Helene, many workers may still be on leave. This could lead to an increase in the unemployment rate in the October non-farm employment report.
In addition to affecting the labor market, the hurricane could also lead to rising food and energy prices and suppress GDP growth. Chevron announced on Monday that it has evacuated all personnel from the Blind Faith platform in the Gulf of Mexico and closed the facility in preparation for Hurricane Milton. Fruit prices may also be affected, as Florida accounts for 17% of the country's citrus production, with the central part of the state being the most productive area.
JPMorgan analyst Abiel Reinhart estimates that the impact of Hurricane Helene on the annualized U.S. GDP growth is about 0.13 percentage points. AccuWeather founder and executive chairman Joel Myers estimates that if the economic loss caused by Hurricane Milton exceeds $200 billion, it may have a negative impact on the U.S. GDP in the third quarter.
