What I Learned This Week

Market participants still underestimate the COVID-19-driven chaos to come (continued). Case-in-point: the muni-bond-market rebound.

Recent tremors suggest the possibility of an earthquake coming in the muni-debt market. The second half of April saw three significant defaults: bonds tied to a tire-recycling plant in Terre Haute, Indiana; a YMCA in Topeka, Kansas; and skilled-nursing facilities outside Boston. Meanwhile, at least eight senior-living facilities have either defaulted or reported some kind of trouble since mid-March, according to Bloomberg. And several municipal borrowers have tapped reserves, including a New Mexico prison and the Las Vegas Monorail. In WILTW April 9, 2020, we dissected the March panic in muni-debt markets, when unprecedented outflows triggered an ETF liquidity crisis. Since then, the muni b…

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