Municipal Bond Stress Is Isolated - Here's Why It Matters
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VanEck5.07K FollowersFollow5ShareSavePlay(7min)CommentsSummary“Risky” muni sectors show rising defaults while “safe” sectors defaults remain near zero.Senior living, charter schools, and Industrial Development Bonds drive most default activity.Diversification and focus on essential-service credits remain crucial in the muni sector. designer491/iStock via Getty Images Municipal defaults remain rare, but recent data shows a widening gap between the safest and riskiest sectors, highlighting the need for careful credit research and selective sector exposure.
Municipal Defaults Are Still Low, But the RiskThis article was written byVanEck5.07K FollowersFollowVanEck is a global asset management firm offering ETFs, mutual funds, private funds, model portfolios, institutional strategies, separately managed accounts, as well as UCITS funds. Since our founding in 1955, putting our clients’ interests first, in all market environments, has been at the heart of the firm’s mission. VanEck has a long history of looking beyond financial markets to spot trends that create meaningful investment opportunities. We were one of the first U.S. asset managers to give investors access to international markets, which set the tone for identifying asset classes and themes such as gold investing in 1968, emerging markets in 1993, and exchange traded funds in 2006 that later helped shape the investment industry. The firm oversees $161.7 billion in assets as of September 30, 2025. Disclosures: http://ow.ly/SZ9450N5qTJ.Quick InsightsHow has the municipal bond default landscape shifted recently?While overall defaults remain rare, the dispersion between safe and risky sectors has increased, with defaults now highly concentrated in riskier, project-based segments.Which municipal sectors currently present the highest default risk?Retirement and senior living facilities, charter schools, and industrial development bonds exhibit the highest and most volatile default rates, often exceeding 1–4% annually within their sectors.What portfolio strategy is recommended given current muni market trends?Investors should favor essential-service credits with stable revenues, maintain broad sector diversification, and avoid overexposure to niche or highly leveraged municipal projects.Recommended For You