48 Pages Posted: 10 May 2011 Last revised: 21 Jun 2011
Date Written: April 30, 2011
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.
Keywords: Municipal bonds
JEL Classification: H74
Suggested Citation: Suggested Citation
Bergstresser, Daniel and Cohen, Randolph B., Why Fears About Municipal Credit are Overblown (April 30, 2011). Harvard Business School Finance Working Paper No. 1836678. Available at SSRN: https://ssrn.com/abstract=1836678 or http://dx.doi.org/10.2139/ssrn.1836678