After Muni-Bond Boom, Analysts Expect Distress to Be on the Rise
Bankers say bad loans are made in good times, and the $3.8 trillion municipal-bond market may be no exception.
High demand from investors, a dwindling supply of new deals, and historically low yield penalties on the riskiest bonds has created an borrower’s market, Municipal Market Analytics analysts Matt Fabian and Lisa Washburn wrote in a note to clients Monday. This atmosphere has produced a rise in issuance in sectors most "prone to impairment," they said. "Over recent years the mix of defaults has become more diversified than it was previously," Washburn wrote.