It seems to me that survivability in public office is predicated on generally not scaring your constituents. But what do I know?

Recently, Senate Majority Leader Mitch McConnell made comments regarding how he would prefer we deal with the impending fiscal damage to local governments caused by the economic effects of the COVID-19 shut-in. His comments were construed as support for allowing municipalities—states, counties, cities, and the like—to declare bankruptcy rather than receive federal aid.

And while the discussion was really more nuanced than that, having to do with extending Chapter 9 bankruptcy relief to states and not shoring up unfunded pensions just because of COVID-19, it was ultimately a good old fashioned dig at the blue states in fiscal dire straits. Yet, the effect was to cause the municipal bond market to trade lower and frighten bondholders in the process.

But here is the good news. I don’t believe there is any reason for municipal bondholders — in Oregon and most other places — to be concerned about widespread municipal bankruptcies nor concerned about the likelihood of repayment of their municipal bond principal and interest, in full.

(Municipal bonds can and do occasionally default, but it is very rare—much rarer than occurs within the corporate bond market, credit-quality held constant. This space doesn’t allow for discussion of the differences between municipalities, and types of municipal bonds, so I am taking liberty with some generalization. But I believe that is the main thesis to apply across most, if not all, municipal bonds.)

While our fiscal house isn’t in particularly good order here in Oregon, due to volatile tax income streams and the PERS mess, savers who have elected to purchase Oregon bonds should be in fine shape. Here are a few things to consider, to that end.

First, it’s clear that McConnell was speaking for himself, that his view is not widely supported in Congress, and allowing municipalities to default is opposed by the president.

What will and will not happen to the underfunded municipal pensions is still to be seen, but this is neither the time nor place to be jawboning state legislatures about how much or little support they can expect from the government when their liabilities come due.

Second, the federal government has already allocated $500 billion to shore up short-term municipality funding where needed, and the president has said he is prepared to do more. It’s very hard to see how in an environment where $6-plus trillion has been allocated to assist businesses and the financial markets that municipalities wouldn’t be supported.

Finally, if those in the know were legitimately concerned about municipal failures, municipal bonds would be undergoing broad downgrading by the rating agencies, and the bonds would be trading at steep discounts to principal. Neither is occurring. While I don’t hold the ratings agencies in high regard, they do generally convey credit worthiness in their ratings, if only in a coinciding or lagging sense. I have much greater faith in the prices of bonds as an indicator of their value.

When municipal bonds are under real duress, they trade at much lower levels than the standard $100 price point associated with their maturity value. Today, Oregon municipal bonds are trading above where they were just a month ago, and nearly all trade at a sizable premium to principal.

So, I hope you’ll forgive the rather arcane nature of this discussion — bonds are tough to talk about without a certain amount of obfuscation. But the fundamental point is rather simple. McConnell’s comments should not be seen as shifting the paradigm of whether or not Oregon municipal bonds are a viable, credit-worthy consideration within a portfolio for those appropriate to hold them. In other words, worry not about your Oregon bonds.