Investment News carried a story about the state of municipal finance. the premise of the article is that Meredith Whitney's analysis of state and local creditworthiness was correct, just her prediction of mass defaults was off a bit. The story goes on to examine the status of three municipal bankruptcies -- Jefferson County, AL; Harrisburg, PA; and Stockton CA -- and come to the conclusion that bondholders are going to come out all right.Yes, revenue streams for local governments have been negatively affected, and yes all of the easy budget catting has been done. Of course, there are municipal projects that are struggling to meet debt service. Still, generally speaking, bondholders appear to in good shape in terms of issuers' willingness and ability to meet their bond requirements. So, Meredith Whitney got everything right,except the part about the actual investment advice.
In the meantime, Bloomberg's yield tables indicate that AAA rated tax exempts continue to trade at higher yields than Treasuries. Enjoy them while you can.
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