With budget woes a daily news staple, state and local governments are taking steps to address the issues. Amid this uncertainty, it's important to understand some truths about investing in munis:
* Defaults are low.When states face severe budget deficits, some investors may shy away from state-issued municipal bonds. Unlike companies, however, state governments cannot go out of business. Most states are required to balance their budgets each year, and debt is usually at the top of their budget priorities. Since any default would taint a state's name in the public-debt markets and significantly increase the cost of borrowing, states aim to avoid defaults.
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