Thanks to their par values and steady coupon rates, bonds are often seen as the ‘safe’ asset class, particularly when compared to stocks. But lately, federally-backed bonds aren’t seeming too safe. The recent debt ceiling issues, credit downgrades, and rising deficits have many investors on edge. Treasury bonds might not be as safe as they seem. But municipal bonds? It’s steady as she goes. According to asset manager Northern Trust, munis’ credit quality is better than ever before. And that makes them a great buy, potentially over Treasury bonds. For investors, adding a dose of munis continues to be the right play. … It turns out that, while the United States Treasury may be in a weakening state, state and local governments are facing the opposite situation. They are getting better in terms of credit quality and ability to pay their debts. While all the pandemic stimulus may have been a weakening factor to the federal balance sheet, it’s been a big win for states.
Source: Municipalbonds
