"The reasons Kidder, Peabody & Co., Inc. believes the municipal credit cycle hasn't reached bottom, yet, are based on cyclical and structural credit factors," said Neal Attermann, vice president of municipal research at Kidder.

"Municipal finance has outstripped the ability of state and local economies, which is exacerbated by the cyclical problems," Attermann explained. "However, it is the more permanent problems that are cause for concern."

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