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Compton may become the next California city to declare bankruptcy. But the municipal bind market isn't panicking.
One of the things that's struck me about the two most recent bankruptcies — or almost-bankruptcies — in California, San Bernardino and now Compton, is that the bond markets aren't predicting a crisis. Reuters MuniLand columnist Cate Long has been following all the recent action in California's troubled cities and correlating it with what's going on in the $3.7-trillion municipal bond markets and she sees...no cascade of impending Chapter 9s:
American cities and states are enduring a lot of fiscal stress, and in some cases their municipal bonds are showing stress too. But overall the muni bond market feels comfortable with the debt of U.S. states and cities. The data does not suggest a broad meltdown.
In that context, she cites Guy Davidson of AllianceBernstein, a firm that according to Long has $3.3 billion in California muni exposure (and $31 billion under management in total) and that therefore might want to argue against a panic in MuniLand. This is from Davidson's blog post: