Earlier this week we did a screencast in which we noted the effect the media has played in recent muni bond market action.  When the mass media gets involved in the game it can change the nature of a market.  There are a number of challenges in talking about THE muni bond market.  The municipal bond market is made up of thousands of issuers including states and municipalities.  Analysts note there are two distinct issues facing states and municipalities.  The first is the near-term challenge of balancing the budget in light of high unemployment and a weak economic recovery.  The second issue is longer term in nature and is largely focused on public employee pension fund shortfalls.  Today we have another batch of links that provide some insight into the muni bond market.

[chart] The ‘Meredith Whitney effect‘ illustrated.  (Money Game)

A report on why the near-term threat of muni defaults is greatly exaggerated.  (Center on Budget and Policy Priorities also Money Game)

Illinois=GM?  The implications of a state bankruptcy law are wide-ranging.  (NYTimes also Big Picture, FT Alphaville)

“GM is a cautionary tale for national and local governments. It granted generous benefits when its profits, and market share, were high, and there were few retirees relative to workers.”  (Economist)

[chart] Should we blame the surging economy for the state of the muni bond market?  (WSJ)

[chart] Why haven’t closed-end muni bond funds moved to a larger discount to NAV?  (the research puzzle)

Updates:

“The fact is that states are not going to declare bankruptcy, and they’re not even going to be allowed to declare bankruptcy.”  (Felix Salmon)

State bankruptcies would solve past errors, what about the future?  (Kid Dynamite)

State income tax hikes are going to undo the recent tax deal.  (Money Game)

Muni bond default fears are overblown.  (Businessweek)

[chart] Maybe investors can simply ignore muni bonds until they start acting better.  (Systematic Relative Strength)