SocGen: Munis Are Way Different Than European Sovereign Debt And You Don't Need To Fear Contagion

The drop in value in U.S. municipal bonds has unnerved many investors, but it is not nearly as big a problem as what’s going on in Europe, according to SocGen.

That’s because, while European sovereign debt remains on the balance sheets of banks on that continent, U.S. banks don’t hold munis in the same way.

From Societe Generale (emphasis ours):

That’s because 70% of municipal debt is held by private investors (mostly wealthy households) and only 25% – or about $700bn – is held by financial institutions.

And even if things go into crisis mode in the U.S., there is implied support from the Federal government which may take the form of more open fiscal policy.

So nothing systemic to worry about here, move along (so long as the Federal government comes in).

Here’s a handy table of why the U.S. is safer, better, than the eurozone, from Societe Generale:


Photo: Societe Generale

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