Municipal Bonds Take A Shellacking Yield more Than Treasuries

Municipal bonds got whacked as the turmoil surrounding insurance forced some selling by a couple of hedge funds into a weak market and prices cratered.
Wall Street Journal:

Months of turmoil in the municipal-bond market, long a placid haven for individual investors, reached a boiling point Friday -- as hedge funds were forced to unwind complicated bets and in the process dump billions of dollars of the securities.

As a result of that surprising forced selling, yields on debt from municipalities and other tax-exempt issuers jumped to their highest levels in history, when compared with safe debt issued by the U.S. government. The average AAA-rated, 30-year municipal bond yielded 5.14% Friday afternoon, compared with 4.42% on a U.S. Treasury 30-year bond.

Aleph Blog asks: I try in my writings to be low hype, so I avoid brash headlines. Every now and then, though, one has to pound the table. With muni bonds today, there are some screaming bargains out there, even if you can’t benefit from the tax deduction. When have we ever seen muni yields at significant premiums to taxable Treasury yields? I can’t think of such a time in my investment lifetime.

Update: Monday morning Bloomberg posted this very good explanatory article:
Auction Supply `Tsunami' Foreshadows Deeper Municipal Losses