What are the chances of Muni Bonds defaulting?
We put our savings in bonds and cash in the summer of 2007 thinking there would be a market crash in 2008. We were off by a year but we saved ourselves from losing half our savings in 2009. We gave up some returns for massive downside protection. We feel very blessed by our conservative strategy (I’m conservative with money, risk taking with startup companies!). Now we have 60% bonds and 40% cash and we’re getting worried about the municipal bond market. Where hearing very mixed things including: Bad: 95% of municipalities are facing budget crisis Good: There is strong demand for bonds. Bad: The Federal Government doesn’t have enough money to bail out municipalities which means possible defaults.
