A crisis in the municipal bond market in the US would be similar to the one sweeping through the euro zone now, Steven Major, global head of fixed income research at HSBC, told CNBC Wednesday.
Analyst Meredith Whitney warned that a wave of defaults by state and local governments is coming and will cause a selloff in the municipal bond market.
"In a way it's the same kind of thing (as the euro zone crisis)," Major said. "The concerns are about the solvency risk for 2012."
The euro zone debt crisis started at the beginning of this year, when investors feared that Greece would not be able to service its huge debt as fresh data showed its budget deficit was much wider than previously thought.
In the US, the problem will be that cash-strapped states will no longer be able to provide the financial support to municipalities that they have in the past, according to Whitney.
The federal government will not bail out the states because of political problems arising from taxpayers in one state covering the debt of those in another state, she added.
Phil Bredesen, governor of the state of Tennessee, told CNBC that the first quarter will be the hardest time for states.
The US government, unlike the states, is in a solid position as its debt has a good credit rating so it should not take austerity measures, Major said.
"If the government is not spending then you have the risk of a Great Depression. This idea that the debt must be repaid is fallacious," he said.
In Europe, yields for bonds of some euro zone countries have risen so much that they have become attractive for some investors again, according to Major.
"There are some people out there, there are some people who see value (in euro zone bonds)," he said.
But Europe must come to a common approach to tackling the debt crisis if it wants to restore market confidence, Major added.
"The problem to me was that that last summit delivered nothing," he said.