Yesterday we noted how a New Jersey muni bond offering was pulled just a few minutes after Chris Christie said at a town hall that healthcare costs were threatening to “bankrupt” New Jersey.Now it’s a little unclear if the connection was real. For one thing, yesterday was an ugly day in the muni market. For another thing, everybody knows that healthcare costs are a huge issue everywhere. And beyond that, people also know that words like “bankruptcy” may be a bit hyperbolic.
Still, all the talk of muni bankruptcies aren’t making muni bond salesmen happy.
Bloomberg quotes head of bond trading at Deutsche Bank Private Wealth Management in New York, Gary Pollack, as saying “He is scaring some people when he says the state is going bankrupt… it wasn’t timed well.”
You have to feel for muni bond dealers right now: The media drumbeat is relentless about how ugly the muni situation is, and of course they’re accustomed to selling munis as tax-free safe-havens, so obviously they’re going to freak out when a borrower is using that kind of language, even if the causality is nonsense.