Things are unfortunatly taking a turn for the worst in most municipalities in the U.S. as the sale of municipal bonds have stopped and those holding them are bailing out. No wonder with the number of municipalities under water with bloated pensions and debt from over spending during the heyday of the housing bubble. With tax receipts dramatically falling municipalities are desperate for cash to pay salaries and many are cutting much needed services such as police and fire department personnel. How long will people within these communities go along with higher crime while the public servants with six figure pensions live high on the hog at their expense? Well, if the muni bond redemption's continue at their ever escalating rate, we won't have too long to find out. Unemployment unfortunately brings increased crime and it all comes together to spell disaster at the community level. This is a most interesting article from Financial-Planning.com
Investors have withdrawn $25.3 billion — a sum that exceeds the gross domestic product of Panama — from municipal bond mutual funds the past nine weeks, according to Lipper FMI. Funds that report their figures weekly posted a net outflow of $1.51 billion for the week ended Jan. 12.
Municipal funds are now reporting outflows at a rate of $3.25 billion a week, based on the four-week moving average. That’s well above any pace seen before the latest series of redemptions in the $478 billion municipal fund industry.
The spate of outflows has fund managers scrambling to sell municipal bonds at a time when dealers are already worried about the willingness of retail investors to digest long-term tax-exempt paper, breeding considerable volatility and weakness at the long end of the yield curve.