A recent article in Bloomberg BusinessWeek covered Wall Street purchasing up distressed municipal bonds. They are buying debt to gain control of revenue-producing municipal projects that look attractive. These investors are looking at everything from highways to water treatment plants to parking to parks. Of course the ultimate goal is to sell the property at a huge profit, when things improve.
The majority of bonds in the distressed municipal market our revenue bonds backed by specific projects. Roads, hotels, or buildings back these type of municipal bonds.
So if you’re looking for a way to play the problems in the municipal bond market, look into this area. If you are looking to buy safe municipal bonds, avoid these type of revenue bonds.