Actually, Municipality Leverage Looks Nothing Like The Subprime Mess With Banks

Charles Doty of Asset Preservation Advisors spoke with CNBC this morning about the state of the muni bond market.

  • 0:35 Most states’ GO bonds are triple A yes, most are. Investment grade muni-bonds are one of the safest investments out there.
  • 1:15 As a bondholder in California, schools get paid first, then bondholders are next. Not a real risk to the bondholder in California, with the incoming cuts. This is not as much a debt issue as an expense issue.
  • 2:12 The default rate is trending lower on munis over the past three years. There are 100,000 issuers in the municipal market. Only .2% of the $3 trillion market is in default. 80% of those bonds in default are coming from the non-riskier sector.
  • 3:00 These municipalities are not leveraged like banks were. They are only borrowing on 3-5% of assessed value; banks were leveraged up to 40%.
  • 4:15 All A rated bonds are not the same. Understanding how those bonds are priced is important. Need to be mindful of downgrades.


Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.