In talking with several DailySpec listers the last week about Detroit, I was told that the bankruptcy filing to be (or then a fait accompli) had already been priced into the general muni market and there likely wouldn't be much reaction to the event itself. Now there's a suggestion that state law may have some role to play.

Question to those in the muni market–what's the likely impact on the muni market if pension benefits are considered out of bounds for the bankruptcy court and the payment to creditors is reduced even further. Will the muni market exact a premium for future muni issuances from Michigan alone? For all munis? Or is this a non-issue?

Part of my curiosity is that I expect a lot of infrastructure spending to be supported by muni bonds. If there's a premium for the Detroit mess, that's less funding available for the IS work itself.


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