RANGIRANJE I STOPA DELIKVENCIJE MUNICIPALNIH OBVEZNICA: EMPIRIJSKA ANALIZA / RANKING AND DEFAULT RATE OF MUNICIPAL BONDS:EMPIRICAL ANALYSIS

Abstract

Municipal bonds are an instrument for financing the expenditures of local communities. By issuing municipal bonds, local communities appear as an initial debtors, while the borrower of last resort (the guarantor) central government budget. At the same time, settling the issued municipal bonds is based on either the local government budget revenues (general bonds) or the cash flows from projects funded through the sale of municipal bonds (revenue bonds). The conditions under which emit municipal bonds, corresponding to the assessment of the financial potential for their repayment, and this potential is estimated by assigning a rating (rank) each class of bonds of local communities. This paper deals with the analysis of municipal bonds ranking methodology and default rates (non-settlement) of issued bonds. Empirical analysis shows that the default rate directly corresponds with the assigned rating of municipal bonds. Also, analysis of the municipal bond market in the United States shows that the highest default rate have municipal bonds in the housing sector and health care sector. Finally, the average default rate in the US municipal bond market indicates that is significantly riskier invest in revenue bond than in general municipal bonds.