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Continued: Know your way around muni bonds in a post-Detroit world; an opaque but largely stable market

  • Article by: CHRISTINA REXRODE , AP Business Writers
  • Last update: August 2, 2013 - 4:10 PM

Since the Great Recession hit in late 2007, a total of 26 municipal borrowers have defaulted on their debts, according to Moody's, and nearly all of them were hospitals and housing projects.

Corporations are much more likely to miss an interest payment. An average of 0.12 percent of all municipal borrowers default within 10 years, according to a Moody's study of defaults between 1970 and 2012. Nearly 12 percent of borrowers in the corporate bond market default over the same span.

How has the municipal market reacted to Detroit?

Interest rates on some bonds have crept up since the news broke, so some cities and towns will have to pay more to borrow from bond investors. Many investors, though, see Detroit as an isolated incident.

For the bond market to really freak out, said Schwartz, the former bond lawyer, "you're going to need a lot more Detroits."

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