WASHINGTON, D.C.: Municipal bond issuers are defaulting at the slowest pace since at least 2010, as a strengthening economy boosts local-government finances.
With the U.S. economy expanding the most in more than a decade, improved balance sheets for cities and counties are easing concerns of widespread failures and supporting an unprecedented rally in their debt.
Fifty-seven issuers had defaulted for the first time this year as of Tuesday, compared with 69 in 2013 and 140 in 2010, according to Municipal Market Advisors, a Concord, Mass., research firm. The number will probably remain in a similar range in 2015 as cost-cutting municipalities in the $3.6 trillion municipal market have proved resilient, said Chad Farrington, head of municipal research in Boston at Columbia Management Investment Advisers.
“For the vast majority of the credits, even a slow recovery is good enough,” said Farrington, whose company oversees about $30 billion in local debt. “It’s impressive how well they weathered the downturn. We’re not seeing major cracks on the horizon.”
Outliers include Detroit, which emerged from a record $18 billion bankruptcy this year, and Puerto Rico, whose electric utility is expected to restructure its debt, Farrington said. Most defaults are occurring in bonds issued for projects sensitive to the housing bust and recession, such as land deals and retirement homes, he said…