Muni risks remain muted. The Moody’s report reveals that municipal defaults have been notably rare throughout the study period, even in times of financial stress, due to delinked revenues and expenditures from state and local governments, which have allowed municipalities to “kick the can down the road” and delay a crisis.
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However, Puerto Rico remained a sore spot in the munis market where 10 defaults occurred in 2017. Due in large part to Puerto Rico’s ongoing financial troubles, last year set a U.S. dollar record for defaults at $31.2 billion, a 15% jump from 2016. On the other hand, the three non-Puerto Rico defaults made up for a relatively small $85 million.
For more information on the munis market, visit our municipal bonds category.