The Federal Reserve Bank of New York has riled analysts and other participants in the U.S. municipal bond market with a report issued last week finding that defaults are more prevalent than credit rating agencies suggest, Reuters reported yesterday. The report, which included non-rated debt, found that muni defaults "happen much more frequently than most casual observers are aware". Bond buyers, wealth managers, analysts and others pointed to the reportes supposed shortcomings. Some market experts were upset that the Fed looked only at the overall number of muni defaults, and not their par value, which would likely be a small portion of the $3.7 trillion muni bond market. They also say that the report's emphasis on unrated debt is skewed and could lead an unsophisticated observer to believe that the market, which is generally considered one of the safest, is instead dangerous.
