Sun 2 Mar 2008
As a matter of course, in the past I’ve looked at quite a few municipal bond funds… including those that are closed-end funds trading at a discount. I even had large chunks of money in a municipal money market fund at one point… these might be things to avoid for the near term.
From Peter Sedacca on Minyanville:
As a follow up to the couple of pieces I wrote on munis, the Shoe has officially dropped… like an anvil.
Sources are telling me that the municipal bond market has all but seized up. Bid list after bid list surface, but nothing trades. The reality is that the bids are 10-15 points under statement values.
I have also heard of a few muni arb funds liquidating and shutting down (these funds mainly buy munis and short govies when the spread is wide). Well, it will get wider, and wider, and wider, until the margin clerk arrives.
If I owned a muni fund, I would not trust the nav, particularly in closed end levered funds. Be careful, folks. And don’t panic…
Sounds scary. Rather than "don’t panic", I would offer different advice — panic early, beat the rush.
Mish has more on his blog, a "forced unwind in leverage is now underway… Anyone over-leveraged in anything right now should be scared half to death."
March 8th, 2008 at 1:59 pm
You might find this interesting:
http://accruedint.blogspot.com/2008/03/municipal-bonds-yeeeeaaaaahooooooo.html
March 8th, 2008 at 5:02 pm
If I were interested in buying municipal bonds right now, I’d definitely look to buy the bonds directly and not buy a mutual fund or closed-end fund that may not be properly pricing their holdings.