The supply slump that’s fueling the best run for municipal debt since 2009 is poised to end next year as governments ramp up borrowing for long-delayed projects from water to transportation, Citigroup Inc. predicts.
Investors such as BlackRock Inc. and Wasmer Schroeder & Co. are growing wary of New Jersey debt, saying the state’s credit rating is poised to fall further without steps to address revenue and pension gaps.
Pacific Investment Management Co. and BlackRock Inc. say the entire $3.7 trillion municipal market is at risk should Puerto Rico lose its investment-grade status, even though many funds aren’t obliged to unload bonds cut to junk.
Investors including BlackRock Inc. and Vanguard Group Inc. say Puerto Rico’s finances hinge on its ability to carry out a planned debt sale this month after the territory’s credit rating was cut to junk.
Investors are pouring the most money since September into the riskiest U.S. local debt, a boon to lower-rated issuers such as Puerto Rico that plan to borrow in the $3.7 trillion municipal market in coming weeks.
A flight to U.S. debt amid signs of an economic slowdown put tax-exempt yields at their highest premium to Treasuries in more than two years last month, creating a buying opportunity that could extend into 2012.