Why Fears About Municipal Credit are Overblown
Harvard Business School
Randolph B. Cohen
Harvard Business School - Finance Unit
April 30, 2011
Harvard Business School Finance Working Paper No. 1836678
Highly publicized predictions of 50-100 municipal defaults have caused anxiety among municipal bond investors. While there is some chance that negative investor sentiment will lead to further spread widening, the probability of the kind of widespread default that would be required to justify current municipal bond yields is low. In this paper we document the reasons why the fears of widespread municipal default during the current recession are overblown.
Number of Pages in PDF File: 48
Keywords: Municipal bonds
JEL Classification: H74
Date posted: May 10, 2011 ; Last revised: June 21, 2011
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