The final chapter of Detroit’s financial recovery closed quietly last month.

If you missed it, we’re not surprised.

Unlike 13 years ago, when the state of Michigan appointed an emergency manager for the city, Detroit’s recovery unfolded largely outside the spotlight. It was, nevertheless, a milestone – and illustrates an important point about the power and resiliency of municipal bond issuers.

Credit upgrades

Just prior to the formal end of a federal court’s oversight late last month, both Moody’s and S&P upgraded the city’s credit. Moody’s raised Detroit’s rating to A3 from Baa1, while S&P bumped it to BBB+ from BBB.

“The upgrade to A3 reflects the city’s strengthened financial resilience on par with A3 peers, supported by consistently solid operating performance, strong reserves, low leverage and good governance practices,” Moody’s said. “These characteristics will provide financial stability amid slow revenue growth in fiscal 2026 and heightened economic uncertainty.”

Recovery plan

Detroit’s turnaround followed a unique path.

After accumulating approximately $18 billion in liabilities and debt, the city adopted a Plan of Adjustment built around the “Grand Bargain,” a landmark public-private effort that helped stabilize pensions and support the city’s long-term recovery.

Relying on a combination of fiscal reforms, state oversight, debt restructuring, pension adjustments, economic development initiatives and disciplined budgeting, Detroit gradually rebuilt its balance sheet and credit quality.

Power of issuers

Detroit may be the most visible example, but across the country, many municipal issuers have spent the past several years strengthening reserves, improving governance and restoring fiscal flexibility.

In fact, Moody’s municipal credit upgrades outpaced downgrades during the first quarter of 2026, AllianceBernstein noted.

Detroit’s story highlights a distinctive strength of municipal issuers: They have an array of powerful tools to rebuild their finances over time, a key reason investors value munis.

Of course, issuers differ and fiscal conditions can change, which is why credit research remains important when selecting individual bonds.

Still, the broader trend is encouraging and the current environment presents a particularly compelling opportunity for investors (“What Long-Term Muni Investors See”). Recently, for example, the taxable equivalent yield on 30-year AAA municipal bonds was an exceptional 7.40% for investors subject to a 40.8% tax rate.

Quality and yield

Detroit’s recent achievement serves as a reminder of a broader and enticing reality today: Credit quality in the municipal market remains strong and yields are elevated.

As a result, investors don’t have to sacrifice one objective in pursuit of the other.