Since the financial crisis, municipal bonded debt outstanding has increased at a snail’s pace of 0.51% per year. With corporate debt growing at an annual pace of 5.33% and Treasuries at 10.18%, it appears the average municipal government has demonstrated relative fiscal restraint. In the 7 years leading up the 2008-2009 financial crisis, municipal debt grew at an average annual pace of…
Specific to the municipal market, issuers who relied on easy money through low rates will be tested making credit analysis even more valuable to investors than in the past. Underfunded pension issues will continue to burden certain issuers. Without pension reform, certain states/municipalities will remain in unstable situations and potentially witness further credit deterioration. On the whole, however, municipal credits are improving and the majority has prudently managed their fiscal balances. We expect headline risk to remain, resulting in increased price volatility. This should lead to long-term buying opportunities.
Tax reform largely left the municipal bond market intact, though a bit squeezed, and it remains an attractive space for individual investors. We are satisfied with the outcome and are also grateful as American citizens and taxpayers that Congress largely left the market unhindered in its ability to fund the bulk (~75%) of our nation’s infrastructure.
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City of Kalamazoo, MI Wastewater System
South Bend, IN Park District
LaSalle-Peru Township High School District #120
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