Summary
- Assured Guaranty Ltd. and muni bond ETFs have been shaken by the pandemic and the veritable bankruptcy of Puerto Rico.
- But there is another looming threat to municipal finances that existed well before the pandemic and which will remain after it has passed which could further subsume municipal finances.
- A dovish Federal Reserve exacerbates risk to municipal pension systems.
- Overly optimistic projections about pension returns are a veritable “Sword of Damocles” on municipal finances.
- The pandemic and Fed policies have both clarified the risk to municipal pension finances, but at a time when it is most difficult to address.
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