While focusing on the Greek crisis and cash-strapped Puerto Rico, investors should not ignore New Jersey, which is a "wonderful window" into the credit difficulties around the world, closely-followed market-watcher Jim Grant said Wednesday, a day after the state's governor, Chris Christie, announced a GOP run for the presidency.
"The thing about Chris Christie is not the traffic cones, it's about the fiscal situation in New Jersey. It's about how the municipal bond market is perceiving this and how it's reacting to it," the founder and editor of Grant's Interest Rate Observer told CNBC's "Squawk Box" in an interview.
The "traffic cones" remark was referencing the Bridgegate scandal, which resulted in three former Christie aides being charged with engineering massive traffic gridlock at the George Washington Bridge in 2013 as political retaliation for the Fort Lee mayor's refusal to endorse Christie's reelection bid. The governor has not been implicated.
"One of the very notable but unnoted developments in the muni-bond market has been the upward trend in yield of some of the more obscure New Jersey revenue or authorization bonds," Grant argued—saying he's not talking about the state's general obligation bonds, which are "well-bid because New Jersey is so heavily taxed."
"The market is properly worried about the state of credit in New Jersey ... which [also] has a massively underfunded pension system [and] has massively unfunded benefits beyond pensions," he said.
"Underfunded pensions are unfortunately a rampant issue in American states and American municipalities," Grant added, but said New Jersey is the "vanguard" of under-funding.
The governor's office was not immediately available to address CNBC's request for comment on Grant's remarks.
On Friday, Christie vetoed a "millionaire's tax" and stripped $1.6 billion in spending from the 2016 state budget passed by Democrats—instead backing a bigger tax credit for the working poor but a smaller public pension contribution.