A major issue for city and state governments is acessing commercial markets for funding infrastructure projects. In India, the municipal finance space has been identified as underdeveloped. There are both public and private constraints for the Indian market.
In America, along with general uncertainty in the market, companies which guarantee state and municipal bonds are in danger of losing their triple A rating. If this were to happen, there would be a major cost to state bodies (as their cost of financing increases) as well as injecting the municipal market with additional risk. These bonds are generally of value to investors and fund managers because they tend to be low risk debt.
With all these developments, it is interesting that Warren Buffet is getting into this business. Is there something he sees that everyone else does not?
I wonder if any lessons can be drawn for the Indian market?
Wall Street Jounral Article (subscription needed)- Buffett to Start A Bond Insurer For Cities, States
If you don’t have a WSJ subscription, here are some other links. Bloomberg and Reuters.
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