What City and County Bankruptcies Mean for the Muni-Bond Market
Municipal-bond markets remain a relative safe haven for investors. Yesterday, after the stock market took its worst nosedive since the depths of the financial crisis, investors flooded into municipal bonds.
But municipal bankruptcies have the potential to rattle the municipal-bond market in several ways. Investors may be prone to worry about a contagion effect from municipal bonds that are in hot water, casting doubt on the financial soundness of surrounding cities, counties or state. A default also translates into higher costs throughout the market, even though investors do still get paid.
The board runs a muni-bond website, called EMMA, which allows investors to search for pricing information for bond trades, as well as official disclosures about material events that could impact bond prices. It's the only resource that makes the same information that retail investors use available to mom-and-pop investors.