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Municipal Bonds: Stability and Hidden Risks in Fixed-Income Portfolios

Municipal Bonds: Stability and Hidden Risks in Fixed-Income Portfolios

Author:

Global Cryptocurrency

Published:

2025-10-26 12:53:02

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Municipal bonds remain a bedrock of conservative investment strategies, offering tax advantages and a historical default rate of just 0.1% for investment-grade issuers since 1970—far lower than corporate bonds' 2.2%. Their resilience stems from municipalities' power to levy taxes, creating a robust repayment backbone.

Yet complacency is a liability. These instruments face credit deterioration, illiquidity, and legislative shifts that can destabilize portfolios. Unlike individual bonds, municipal bond funds lack maturity dates, stripping investors of the 'hold to maturity' defense against price volatility. Active management isn't optional—it's imperative.

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