Back in the Comfort Zone

摘要

Although it's supposed to be a relatively safe haven, the municipal-bond market has taken some big hits lately. The economic slowdown has thrown state and city budgets out of whack as revenues fall far short of spending plans made just a year ago. Credit agencies have been downgrading municipalities, especially big borrowing states like California and New Jersey. And localities everywhere are pumping out new debt to tide them over." Against this background, it's important to stick to top-quality bonds. That's not hard be- cause half of all munis carry a triple-A rating. The vast majority get that rating because they are insured, which guarantees investors timely payment of interest and principal even if the issuer defaults. The four largest muni bond insurers―Ambac, Financial Guaranty Insurance, Financial Security Assurance, and MBIA―are sound companies and have paid claims in the few instances when issuers have defaulted, says Howard Mischele, a director at Standard & Poor's.