How Safe Are Municipal Bonds Today?
January 11, 2010
Reports about the poor financial condition of state and local governments make the headlines every day, but municipalities continue to take prudent action, including cutting expenses and raising taxes, to balance their budgets. State governments are facing particularly difficult situations because of their dependence on economically sensitive tax revenues for the bulk of their budgets; revenues are likely to stabilize and begin to grow when recovery takes hold. Our analysis points to selective credit rating downgrades rather than a meaningful increase in defaults.