The bond market in Treasuries may be somewhat steady to firm this Thursday, but that is not the case for municipal bond funds and for the exchange-traded products behind them.  The persistent call from Meredith Whitney calling for more and more municipal bond defaults rising well into the billions in 2011 and beyond is now mixed with a more broadly-perceived notion that there is a real risk greater than in the past to those holding municipal bonds.

We are tracking the moves in the exchange-traded products of SPDR Nuveen Barclays Capital Muni Bond (NYSE: TFI), iShares S&P National AMT-Free Muni Bd (NYSE: MUB), PowerShares Insured National Muni Bond (NYSE: PZA), and the PIMCO Intermediate Muni Bond Strategy ETF (NYSE: MUNI).

At issue is a whole slew of concerns.  California issues are not going away with usually more debt and therefore higher leverage, Illinois is getting worse according to many watchers, New Jersey had to cut a fresh issue by one-third to get the sale off, there are ongoing concerns over assets migrating out of muni-funds for weeks now, and a general weak demand are all individual parts of the underlying problems for muni-investors.

SPDR Nuveen Barclays Capital Muni Bond (NYSE: TFI) is down 1.2% at $21.35 versus a 52-week trading range of $21.34 to $23.79.

iShares S&P National AMT-Free Muni Bd (NYSE: MUB) is down just over 1% at $97.43 versus a 52-week range of $96.89 to $107.29.

PowerShares Insured National Muni Bond (NYSE: PZA) is down 1.4% at $21.81 versus a 52-week range of $21.77 to $25.14.

PIMCO Intermediate Muni Bond Strgy ETF (NYSE: MUNI) is down only 0.5% at $49.79 versus a 52-week range of $49.76 to $52.56.

Due to variable dividend payments and due to capital gains and losses being distributed to holders on a very irregular payment, we have not included the indicated yields for each.

JON C. OGG

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