Municipal Bond Mutual Fund News

December 20-24, 2010 Municipal bond Mutual Fund Quiet Week

municipal bonds

This week’s (December 20-24, 2010) saw another week of falling prices in Municipal bond Mutual Funds. This week municipal bond related news included:

  • Money market tax-free funds are having problems and shrinking, leading to higher borrowing costs for already cash-strapped state and local governments
  • Bond anticipation notes and variable rate demand obligations may have problems in the near future, possibly leading to a market freezeout like auction rate securities had during the credit crisis
  • State Pension woes are finally in front page news. Hopefully governments can work through these liabilities before a day of reckoning occurs.

Hopefully this downdraft is now over, as municipal bond mutual funds started to rise on Thursday and continued into Friday. Note that yields are starting to rise on these funds.

Morningstar had a good article today on rising interest rates and bond mutual funds.

Fidelity intermediate term municipal bond fund (FCSTX) 0.0% for the week.
Month to date: -0.84%. November -0.14%. Current Yield 1.64%.

Vanguard California intermediate term municipal bond fund (VCAIX) +0.09% for the week.
Month to date: -1.74% November -2.3%. Current Yield 3.35%.

See how the Fidelity intermediate term municipal bond fund (FCSTX) and Vanguard California intermediate term municipal bond fund (VCAIX) performed this week on this graph:

See how the Fidelity intermediate term municipal bond fund (FCSTX) and Vanguard California intermediate term municipal bond fund (VCAIX) performed this month on this graph:

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