The NY Fed’s Libertystreet Economics blog recently published a piece entitled “The Untold Story of Municipal Bond Defaults”. The post starts out with the question of whether the recent problems in places like Stockton CA, Jefferson County AL, and Harrisburg PA point to an increase in future municipal bond defaults. To that point the authors state:
History—at least the history that most of us know—would seem to say no. But the municipal bond market is complex and defaults happen much more frequently than most casual observers are aware.
Later in the paper they go on to show that while the rating agencies report 71 municipal bond defaults in the period from 1970 to 2011, the data the NY Fed compiled for its study (which also includes unrated bonds) shows 2521 defaults during that same time period. To help drive home that point they include the following chart:
|