2010 will be an important year for credit analysis in the municipal market, and investment opportunity still exists. Many municipalities continue to struggle with shrinking revenue bases and increasing service costs. It is becoming harder for issuers to bridge budget imbalances, forcing tough cuts and funding decisions. Issuers who cannot make or execute these decisions will see credit ratings cut, and investors will lose market value. Expect some draconian headline news, and some possible, small, defaults.
MainLine West reminds you that not all municipal bonds are created equal. 2010 may be the year remembered for municipal credit concerns. MainLine West remains committed to using our own credit research, differentiating and flagging those issuers, and deals, that put principal at risk. In general, we recommend investors buy both tax-exempt and taxable municipal bonds with the highest credit quality, including essential service and unlimited taxing power, voter approved, general obligation bonds to continue to sleep well at night.