The red hot municipal bonds space is being rattled by default fears, as some high profile investments begin to unravel.
The risk of municipal-bond defaults in the future is “higher than it’s been in quite some time,” said Deutsche Bank’s Pollack, because of the unprecedented stress on state and local budgets.
Harrisburg, the capital of Pennsylvania, has considered filing for reorganization under Chapter 9 of the U.S. bankruptcy code as it faces $68 million in debt.
About $2.4 billion of Florida’s so-called dirt bonds, or debt to finance real-estate developments, used reserves or failed to make interest payments in November, up from $1.7 billion in May, according to Interactive Data Corp. That’s the largest amount on record and “reflects an increasing trend,” said Edward Krauss, an analyst for the Bedford, Massachusetts- based research firm, in an e-mail.
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