Municipal Bond Default Rates

Between 1970 and 2011, Moody's reported that there were 71 municipal bond defaults. Similarly, S&P said that there were 47 municipal defaults from 1986 to 2011. These default numbers are over two different periods but appear similar, so we should be able to believe both numbers. But the Federal Reserve reports there were 2,521 and 2,366 defaults over the same periods! So now who do we believe? It depends on how you count. Both Moody's and S&P reported only defaults for rated bonds, while the Fed included defaults for unrated municipal bond issues, most definitely a riskier class of municipal bonds. The data also shows that general obligation bonds are unlikely to have defaulted, while revenue bonds and industrial development bonds were much more likely to have defaulted.