I don't think you can compare MBS ratings with municipal bond ratings. Mortgage backed securities were a derivative of a pool of bundled bad loans, meaning the underlying asset was toxic.
Municipal bonds are not really derivatives, there is no underlying asset that backs it except for the repayment history from the borrowing entity. If I buy a muni bond slated for an affluent county in New Hampshire to build a new high school then my risk is considerably lower than buying a security where you are dependent on a group of individuals with unknown repayment ability actually completing the terms of their loan (MBS). They are completely different animals
As far as municipal defaults, sure it happens. But very infrequently. Even with piling up liabilities municipal entities generally are able to pay on their bonds even if it means issuing more bonds because if they default, all their liquidity dries up.
Municipal bonds are not really derivatives, there is no underlying asset that backs it except for the repayment history from the borrowing entity. If I buy a muni bond slated for an affluent county in New Hampshire to build a new high school then my risk is considerably lower than buying a security where you are dependent on a group of individuals with unknown repayment ability actually completing the terms of their loan (MBS). They are completely different animals
As far as municipal defaults, sure it happens. But very infrequently. Even with piling up liabilities municipal entities generally are able to pay on their bonds even if it means issuing more bonds because if they default, all their liquidity dries up.