Either we have a radical misperception about the willingness of Congress to bail out the states — we don’t see it happening — or there’s still a massive moral hazard bet going on in the muni market.
Half of respondents to a Bloomberg Global Poll conducted Jan. 21-24 say they think a default by a state or major city this year either isn’t likely or is just somewhat likely, though almost as many, 46 per cent, say such a prospect is likely.
Even if a default were imminent, two-thirds of global investors say Washington would come to the rescue, and almost 6-in-10 say it is unlikely or only somewhat likely that turmoil would spread to other financial markets this year, according to the poll of 1,000 Bloomberg customers who are investors, traders or analysts.
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