Muni GO Bonds Hang Tough
November 30, 2011
Despite the financial problems of governments, defaults during the "Great Recession," as some have dubbed the recent economic crisis, have largely been concentrated in the riskiest sectors. According to one study, defaults on municipal debt increased from $329 million in 2007 to almost $7.8 billion in 2008. In 2009, the default total was $6.3 billion, followed by another decline to $3.6 billion in 2010. In another study, Bank of America pegged municipal defaults through September 30, 2011, at $1.1 billion, one-quarter the 2010 level. Local GO bonds accounted for only 1% of 2011 failures.
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<IMG SRC=http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=ASLPITAX&scale=Left&range=Custom&cosd=2004-01-01&coed=2010-01-01&line_color=%230000ff&link_values=false&line_style=Solid&mark_type=NONE&mw=4&lw=1&ost=-99999&oet=99999&mma=0&fml=a&fq=Annual&fam=avg&fgst=lin&transformation=pc1&vintage_date=2011-12-19&revision_date=2011-12-19>
Fed hasn't updated it yet but no doubt it'll continue to be positive.
Markets and reality are too complicated for some people.
November 30, 2011
Despite the financial problems of governments, defaults during the "Great Recession," as some have dubbed the recent economic crisis, have largely been concentrated in the riskiest sectors. According to one study, defaults on municipal debt increased from $329 million in 2007 to almost $7.8 billion in 2008. In 2009, the default total was $6.3 billion, followed by another decline to $3.6 billion in 2010. In another study, Bank of America pegged municipal defaults through September 30, 2011, at $1.1 billion, one-quarter the 2010 level. Local GO bonds accounted for only 1% of 2011 failures.
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<IMG SRC=http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=ASLPITAX&scale=Left&range=Custom&cosd=2004-01-01&coed=2010-01-01&line_color=%230000ff&link_values=false&line_style=Solid&mark_type=NONE&mw=4&lw=1&ost=-99999&oet=99999&mma=0&fml=a&fq=Annual&fam=avg&fgst=lin&transformation=pc1&vintage_date=2011-12-19&revision_date=2011-12-19>
Fed hasn't updated it yet but no doubt it'll continue to be positive.
Markets and reality are too complicated for some people.
