The municipal debt market laughed off a doom-and-gloom prognostication from analyst Meredith Whitney in late 2010, but high-profile municipal bankruptcies in California and Pennsylvania have some investors questioning if Whitney was not wrong but early. "Munis will fluctuate more than an investor previously holding a 4% CD would want," says Randy Warren, chief investment officer of Warren Financial Services in Exton, Pa. Some analysts fear that junk bond ETFs are stuffed with high-coupon bonds selling at above par. While spreads on junk bonds over Treasurys haven't reached record lows, Westwood's Freeman reminds investors of the significant risk in junk debt.
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