The King is dead; long live the [bond] King – part II

Another voice joined the municipal bond debate on Wednesday, when Bill Gross, aka the Bond King, was interviewed on Bloomberg television.  He said he doesn’t, “subscribe to the theory that there will be lots of [municipality defaults.]“  Like most, though, he doesn’t think that the municipalities are in great shape (“there will be increasing amounts of defaults”).  He praised Illinois, which raised its state income tax from three to five percent, and Jerry Brown, governor of California, who is taking wide-ranging steps to shore up the Golden State’s finances.  It’s at that level–the state’s–where he sees the least risk of municipal bond trouble.

Here’s a look at the pricing of default insurance on Illinois state bonds following the income tax increase.

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