Cheapest Revenue Debt Draws Buyers Fleeing Stockton: Muni Credit
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The worst-performing part of the municipal market is drawing buyers as bankrupt Stockton, California’s attempt to stick investors with a loss heightens the appeal of debt backed by revenue from services such as water and electricity.
A federal judge said this month that Stockton, the most-populous U.S. city to enter bankruptcy, can stay under court protection. Bondholders will probably get less than they’re owed, and that precedent makes debt paid through sewer or transport revenue attractive because those payments have stronger legal protection than general obligations, said John Mousseau, a portfolio manager at Cumberland Advisors in Vineland, New Jersey.