Legitimate bond funds are insured.....that is why they are so safe.
Are you being tongue in cheek, here? That sort of thinking has led to all manner of problems in other areas.
In the face of widespread default, how will any insurance itself avoid the same fate? It can't eliminate systemic risk. It can only accomodate a limited number of specific instances.
Bonds have been approved and issued by a great number of municipalities under boom-time assumptions that are now proving tenuous for a lot of them. The possibility of default is not just an abstraction, it's looking increasingly likely.
I know and understand, but they said the same about mortgage bonds. I'm just wondering at what point the defaults impact the insurance companies. With apologies to the Romans, "Who insures the insurers?" (O Geez, Bernacke comes to mind. :-) )
“”Legitimate bond funds are insured.....that is why they are so safe.””
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1. Bond funds are not insured. Only the municipal bonds that make up the funds are for the most part insured.
2. Municipal bonds formerly were safe because the bonds were insured and the issuer was financially prudent. Today the Bond Insurance Companies have terrible balance sheets. The Bond Insurance Companies got themselves caught up in Mortgage Backed Securities and Collatorized Debt Obligations and lost their proverbial shirt. To further compound the problem the municipalities have been overspending and their balance sheets are terrible.
So today there are lot more risks with Municipal Bonds, but if you do your research good bonds can be found.