Volitility. Some uneducated think that states can actually go into bankruptcy, well they can't, and most states outlaw municipalities from bankruptcy as well. Debt service is a minor part of all state, county, and city budgets. For defaults to happen would be ludacris considering how small and trivial the costs are.
Think about all the unfortunate saps letting their money managers destroy their wealth today by panic selling of stuff they'll mostly buy back when the astrological signs wink at them.
Notice how the little darlings follow each other like lemmings over the cliff - when a few sells, the reat of the pack jumps on the death wagon. For them, it's better not to be out of step with their peers than to improve their customers' returns.
With an index fund portfolio you avoid this corrupt madness.
Nov. 11 (Bloomberg) -- Municipal debt yields rose in most maturities yesterday, with rates on top-rated tax-exempt debt due in 20 years climbing to the highest level since July.
Twenty-year AAA general obligations jumped about 0.13 percentage point today to 3.69 percent, according to the Bloomberg Valuation index for that maturity. States and municipalities had planned to sell $11.2 billion in municipal debt this week, the most since Oct. 29, according to data compiled by Bloomberg. That means many issuers must offer greater yield to persuade investors to buy their debt.
The market is having trouble absorbing sales in a week shortened by the Veterans Day holiday in the U.S., said Jim Holihan, a portfolio manager at New York-based Evercore Partners LLC.
“It’s a lot of supply to come in four days,” said Holihan, who helps oversee about $1 billion in municipal securities. “We haven’t handled it well.”
Yields on two-year AAA debt fell for a second-straight day, dropping 1 basis point to 0.44 percent after touching 0.42 percent, the lowest since Sept. 22, according to a two-year Bloomberg Valuation index. The difference in yield between 2-and 30-year bonds is 3.75 percentage points, the most since June 28, Bloomberg Valuation data show.
Investors are making defensive moves against possible inflation being brought about by the Federal Reserve’s expansion of its policy of buying long-term securities to bolster the economy, Holihan said.