Muni Market Faces Aftermath of Detroit Bankruptcy
By Hal M. Bundrick
NEW YORK (MainStreet)--The Motor City blew an engine, hit a wall and, with parts flying, made a quick pit stop last week as the city of Detroit filed for bankruptcy, the largest in U.S. history. Even though this was a slow-motion wreck long anticipated by industry analysts, how will the municipal bond market, already rocked by volatility and drastic losses in June - the largest correction in nearly ten years - react to recent events?
Muni pros seem unfazed.
"Detroit's Chapter 9 filing on July 18 came slightly sooner than expected, but in no way was a surprise to the market," write Peter Hayes and James Schwartz in a market report for BlackRock Municipal Bonds Group. "The city's problems, while long known to the municipal market, have had little bearing on it -- a scenario we expect will continue, even in the wake of the bankruptcy filing. For the broader municipal market, we do not anticipate a widespread systemic effect. The basic fundamental credit underpinnings of the municipal market remain very healthy and, in fact, are better than they were in 2008.",Tom Kozlik, a muni market analyst with Janney Capital Markets, is equally stoic.
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