Zika could bite municipal bond market

Loop Capital suggests that municipal bonds may see a fallout from the Zika virus. Municipal bonds could offer insight into deeper economic impacts as the spread of the disease is associated with dense urban transport centres, therefore, the economies of large issuers of municipal debt - such as large cities in the south-east of the US - are likely to be impacted. The fear of Zika can also reportedly lead to an "altering economic behaviour," reducing retail sales, tourism and weakening local economies. Furthermore, this could translate to falling bond prices and rising yields on any new issuance for those areas, and put pressure on prices of related bonds already in circulation. As we noted earlier this week, scientists have uncovered the first reliable evidence that Aedes aegypti mosquitoes carry the Zika virus, a crucial breakthrough in trying to eradicate that species; now a new report suggests that the case rate of microcephaly in unborn children could be as high as 13% for mothers infected with Zika in the first trimester.

Brazilian scientists have found the first hard evidence the Zika virus, which has been blamed for causing brain damage in hundreds of babies, is carried by the Aedes aegypti mosquito.

Despite the fact that world health authorities have said for months that the mosquito species is the main vector for Zika, no Aedes aegypti carrying the virus had previously been found in the Americas.

Brazil, the country hardest hit by the Zika outbreak, has focused its efforts to contain the virus on eradicating Aedes aegypti populations, and the scientists behind the study said it was important to confirm the link between the mosquito and the disease.

The researchers, from the Oswaldo Cruz Institute, yesterday confirmed they had found the virus in three groups of Aedes aegypti mosquitoes collected in neighborhoods in northern Rio de Janeiro state.

Microcephaly is a debilitating neurological condition. (AFP file image)

They said Zika had previously only been detected once in mosquitoes in the Americas, in a recently published Mexican study that found the virus in the Aedes albopictus species.

The Brazilian researchers collected almost 1500 adult mosquitoes over 10 months, around half of them Aedes aegypti. The latter were the only ones in which Zika was detected, they said.

That "reinforces the evidence that A. aegypti must be the most frequent Zika transmission vector in Brazil," they said in a statement on the institute's website, adding that they were in the process of publishing their results.

Zika, a tropical virus that originated in Africa, can cause relatively mild, influenza-like symptoms.

But since the outbreak was detected in Brazil in October last year, authorities have reported a surge in babies born with microcephaly - a condition that causes abnormally small heads and brains - after their mothers were infected with the virus.

The health ministry said last Wednesday that 1384 babies had been born with the condition and 59 had died since the outbreak began.

The World Health Organization, which has labelled the suspected link between Zika and microcephaly an international emergency, said yesterday that a "massive policy failure" on mosquito control and access to family planning services was to blame for the crisis.

Zika has also been linked to neurological problems including Guillain-Barre Syndrome, in which the immune system attacks the nervous system, causing paralysis and sometimes death.