Municipal bonds surrendered 3/4 point yesterday, and at least one portfolio manager sees more trouble ahead. "I think we're involved right now in a yearend iiquidity squeeze, and it's going to get a lot worse before it gets better," said Patricia M. Dolan, a managing director at Prudential Investment Advisors. As a result. municipals likely will "severely underperform" the taxable market going forward, she said.
Dolan said the flow of cash into tax-exempt mutual funds has been either flat or negative at a time when the Street will be getting ready to close its books for the year.