Municipal bond defaults could hit the $100 billion market over the next five years, according to a new estimate from Roubini Global Economics.
This comes just after Moody's chief economist Mark Zandi estimated the chance of significant defaults to be zero.
Although $100 billion of defaults spread over five years would be much higher than the estimates of the muni optimists, his firm's figures would appear to be less cataclysmic than those suggested by Meredith Whitney.
The report was written by RGE analysts David Nowakowski and Prajakta Bhide. They suggest that the problems are not "systemic," will not "infect the financial system," and that defaults "will continue to be isolated events," according to the Wall Street Journal.
Also to the bondholders favor, the report points to some significant advantages for those invested in muniland. The typical recovery rate for municipal bonds is 80 percent—which is a much better rate than what is typically seen on corporate defaults. As the article points out, this may be related to the Chapter 9 municipal bankruptcy code, which provides strong protection for the holders of municipal debt.
Still, the report does contain this ominous warning: "Avoiding a crisis will involve real austerity that has only partially been implemented thus far."
So if Whitney is a bear's bear on munis, Zandi is a bulls bull, then Roubini's analysts are bearish bulls. Or should that be bullish bears?
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