An index maker’s view of muniland
J.R. Rieger, Vice President of Fixed Income Indices at S&P Dow Jones Indices, hosted a webinar about the data he uses to understand muniland and the performance of munis versus corporate bonds. Here is some of his team’s analysis.
State and local tax collection data from the U.S. Census is widely used in muniland:
Below is a comparison between muniland and corporate bond defaults in 2013 (S&P Ratings data – a separate operating unit within McGraw Hill). Note the 0.107 percent default rate for investment-grade municipal bonds, 0.807 percent default rate for municipal high-yield bonds versus 2.10 percent in the S&P corporate speculative grade (high yield) index.
Below is more detailed default data by muniland sector for 2013. Note the high number of land-backed deals (dirt bonds) that defaulted. The overall default rate for muniland remains low at 0.45 percent:
Below is an especially interesting chart contrasting the rating distribution between municipal bonds and corporate bonds. Notice how much higher quality municipal bonds are than corporate bonds in the Standard & Poor’s universe:
The chart below highlights why so many muniland commentators are pushing high-yield municipal bonds this year: