The $100 Billion Muni Sector Where Corporate Credit Risk Wears a Tax-Exempt Wrapper

How Private Credit Contagion Is Reaching Municipal Bonds Through Prepaid Energy Deals

There is a $100 billion corner of the municipal bond market that most investors don't fully understand. Prepaid energy bonds look like munis, trade like munis, and pay tax-exempt interest like munis. But the credit risk inside them has nothing to do with the municipality. It comes from a corporate guarantor, and increasingly that guarantor is not a bank. It's an insurance company owned by a private equity firm. When private credit stress hits the parent, it flows downhill into muni portfolios that were never designed to carry that kind of exposure. Here's how the contagion works, why it matters right now, and what the market is actually pricing.