Are investors worried about municipal bonds defaulting? Nope

New data suggest that investors are not worried about high default fears when it comes to municipal bonds, reports the New York Times.

Although a large number of municipalities all over the United States and in U.S. Territories face unprecedented debt woes, investors are still embracing these kinds of bonds. The data show that there have been 27 consecutive weeks where money has flowed into municipal bond funds, though financial experts have put forward warnings of high default risks.

Essentially, it’s incredible that investors are buying up these bonds when there’s an immense risk of potential default.

So why are investors still in love with municipal bonds? Because the interest paid, no matter how little it may be, is federal and state tax-free. This provides the bonds with a considerable advantage of Treasury and corporate bonds, even if they have put forward similar or higher yields.

It’s terrifying because a lot of municipal bond portfolios have the likes of Detroit, Puerto Rico and Californian cities inside.