Which is why I've been buying muni bond funds. In my IRA no less. They're down 10-20% due to fears that were based on revenues from the depths of the recession. It's a hedge against the broader (stock) market. If the market pulls back this summer while the states are showing progress against budget deficits, those bond funds might get a 5-20% pop. In which case, I'll liquidate the bond-fund holdings and use the proceeds to buy discounted stocks.
In the meanwhile, some states -- CA is one -- aren't even issuing new debt. That means the existing notes may become a scarce commodity, which may drive prices higher.