The most recent drama brought to us by the news media has been the risk of municipal bond issuers defaulting on their debt obligations. We and other professional investors in municipal bonds have been aware of and monitoring the heightened municipal bond default risk for nearly three years. However, it took a segment on 60 Minutes featuring the photogenic, publicity-minded banking analyst, and newly-minted municipal bond expert Meredith Whitney to really light up the airwaves on this issue. Whitney predicted: “Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars’ worth of defaults.”
Bottom line: The risk of municipal default is higher than the norm of the past 70 years. But, history and the factors just described show us that municipal bonds are far less risky than corporate bonds. That is the reason that the average credit rating of all municipal bonds is near AA, while the average rating for corporate debt is at least a letter grade lower. There are still municipalities out there that are very bad credit risks. And, Ms. Whitney rightly says there is more risk in municipal bonds today than there has been over the last 70 years.
Source: Rising Dividend Investing
Related Articles:
Municipal Bonds: Is It A Buying Opportunity?
Posted by D4L | Saturday, January 01, 2011 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
~
Popular Posts Last 30 Days
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
GameStop (NYSE:GME) lost about 40% of its market value over the past three years, as rising digital downloads and declining mall traffic thr...
-
In a capitalistic society, opportunities to generate (mostly) passive income are all around us. Dividend growth investing is one of the most...
-
Investors buy dividend stocks for a few reasons. For one, they provide income via dividends that act as a bonus on top of capital appreciati...
-
These elite income producers have rallied this year. Their brilliance at producing passive income seems to have caught the market's eye ...
-
If you are looking for reliable dividends, these three Dividend Kings should be right up your alley. Dividends are paid at the discretion of...
-
Buying dividend stocks can be tricky. Oftentimes, stocks that pay exorbitantly high dividends have underlying financial problems, and their ...
-
While optimism in the broader market remains robust – particularly for hyped-up sectors like technology – investors may still want to consid...
-
A strong dividend investing strategy may be to focus on high-quality names that score well on several dividend-related metrics. In other wor...
-
When many investors think about tech stocks, they often think first about high-growth names that come with outsized risk -- not mature, divi...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.