Municipal Bonds don't make the news like the stock market. The total market cap of the U.S. market is just over $13 Trillion, and the total market cap of the U.S. Muni Bond market is just under $3 Trillion.
Well, it was just under $3 Tril.... yesterday and a few days last week saw that market lose 10% to 12% of its market value by my crude reckoning (because the vast majority of bonds don't trade on a regular basis I used the big closed end muni bond funds as an indicator). BTW.... in the last 2 months the U.S. Treasury Long Bond is down about 15%, and the 20 year (as measured by TLT) is down around 13%. Care to guess how much more the MBS bonds are down? Hard to tell because it seems the government owns them all and they ain't (can') selling.
If the goal of QE2 was to bring down interest rates (which means raise bond prices) by any objective measure it has been an abject failure (actually, it has been an unmitigated disaster).
Why all of this has not leaked into the U.S. equity market is beyond me... but I would not be a hero. Kinda sorta feel the same way about commodities here, too.
Over the past couple of years tons and tons of money has come into these bond funds from investors trying to acquit themselves of the equity market's volatility... when they get their statements over the next month or 2 there's a pretty good chance some of what's left of that money (about 88%) is going elsewhere. This will cast a further cloud over the QE2 nonsense... not to mention create quite a headwind everywhere else.
Forewarned is forearmed.