Has the financial crisis had a significant and continuing effect on the municipal bond market?
Fields: Yes, the financial crisis has had a profound effect on both investors and issuers in the municipal bond market. Many different, but related, events have changed the entire landscape, and it is important for investors to understand these changes in order to adjust their expectations for municipal bond investments. In the New Normal economic environment, PIMCO believes growth prospects and returns on assets will likely be lower than they have been in past decades, and the effects of inflation, when it does rise, may be even more threatening to investors. Meanwhile, emerging nations will likely continue to become even stronger drivers of global growth. The New Normal is challenging many long-held assumptions about portfolio allocations and is likely to have continued and profound implications for the municipal bond sector going forward. Q: What are some of the major challenges facing municipal issuers? Blair: The economic crisis hit state and local municipalities very hard. States
