JP Morgan will scare the Bejesus

From JP Morgan on munis:
Market volatility should continue next week with S&P’s US downgrade following this week’s manic capital market performance
Tax-exempt yield movements will likely remain unstable, as dictated by benchmark Treasury yields, despite low long-term new issue volume next week
Instability in the US credit may further net outflows in the municipal space. Net issuance, however, remains supportive of liquidity
After S&P’s announcement of the US downgrade, expect follow-through on municipals directly supported by the US credit, as well as those highly reliant on the federal government
The Central Falls bankruptcy case will be important to follow because of its potential broad implications for local government credit
While we have been warning for some time of the elevated strain on local government fiscal positions, Central Falls could potentially have ramifications that could support local credit quality by (i) bringing clarity to the priority of the GO credit, (ii) providing a model for state activism, and (iii) adding steam to the momentum of some small cities using Chapter 9 to reduce fixed labor costs Zero Hedge

The states and munis have the sticky wage issue, mostly because of my bozo guv.