"The time to buy securities is when there are explosions going all around,” says Loop Capital's Chris Mier, talking about bargains in municipals thanks to Detroit and Puerto Rico. Nearly $44B has been pulled from muni-bond funds this year, the fastest pace on record, according to Lipper. The average yield on high-grade bonds is 3.13% vs. 2.17% at the end of 2012, and the sale of new muni paper is off 15% from a year ago.
States account for more than $500B of muni debt and 14 carry AAA ratings - just 4 U.S. companies are rated AAA. "“Investors have overreacted and worry that problems may be everywhere,” says Eaton Vance's Jim Evans. “There are definitely some difficulties, but the vast majority of credits are in good shape.”
See also: Puerto Rico muni prices plummet 6.6% in October, off nearly 25% YTD.