The Growing Crisis In The Municipal Bond Market:
Do
Analysts And Investors Have The Right Mindset And Tools To Handle
It?
Ballooning debt, pensions and other obligations; shrinking tax receipts; potentially waning Federal government support; aging infrastructure; and the frustratingly slow economic recovery have made municipal bonds an unfamiliar landscape. The security blanket of rating agencies, bond insurers and the ability to raise funds via taxes and other levies is unraveling quickly. In order to thrive - and take advantage of the opportunities that come with volatility - municipal investors and analysts need to approach the market differently. When it comes to credit selection and risk management, they will need to focus keenly on the underlying credit of the issuer - and, importantly, look beyond stale financials and ratings. The challenge is to enhance the current approach by developing new, more meaningful credit metrics that incorporate the demographic and economic information that may be the best predictors of tax base, tax rolls, tax receipts and the best indicators of government spending. Meeting the challenge successfully will require new tools - and a new frame of mind...
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