Press Room: Article

June 13, 2011

Revisiting Municipal Bonds

As the overall economy showed signs of improvement in the fourth quarter of 2010 and into 2011, the municipal bond market continued to struggle.

An increase in mutual fund redemptions that drove prices lower was caused in part by relentless negative media attention regarding credit ratings and potential defaults. Investor fear was fueled by Wall Street analyst Meredith Whitney’s 60 Minutes appearance in December where she commented, “You could see 50 sizable defaults. Fifty to one hundred sizable defaults. More. This will amount to hundreds of billions of dollars worth of defaults.” As the press piled on, increasing the fear of defaults, prices in the fourth quarter suffered their worst decline in 16 years.

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