Quick Question on muni bond funds

[KevR1025]

Hi Guys,

Can anyone provide some insight on Muni Bond funds such as the Michigan Insured fund- MYM.

Many of these funds have been hit hard and are yielding over 6%, with a tax equiavalent yield above 8%.

Whats the catch? What am I not looking at?

Thanks.

 

[jeb9999]

Ambac and MBIA insurance is worthless and the local governments might default in a bad economy.

 

[bidask]

i would like to know too if there are any reasons other than the troubles with municipal bond insurers.

 

[Daal]

liquidity has vanished for muni bonds so they are mispriced. problem is to get data to buy the ones that are unlikely to default

 

[KevR1025]

Thanks for the replies. I knew about MBIA and Ambac but in the last week yields have increased sharply on these funds. Must be because risk of default is much higher then?

 

[nazzdack]

It becomes tougher to raise a myriad of taxes in this environment to pay off the bonds in a timely manner.