SLC Regional Resource | January 2012

Municipal Bonds: Trends in 2011

Sujit CanagaRetna

In December 2010, there was a great deal of speculation that dozens of cities and local governments would default on their municipal bond debt obligations amounting to hundreds of billions of dollars within a year. According to this line of thinking, this cataclysmic outcome would require states to bail out these municipalities, an outcome that, given the tenuous fiscal position of states, in turn would require the federal government to bail out the states. This SLC Regional Resource examines how the municipal bond market fared in 2011, if fears expressed by certain experts regarding widespread bond defaults were realized, if investors shed their holdings in municipal bonds and fled to other asset categories and a number of related topics.