Is the drop of 11 cents over the past few days connected to the "fiscal cliff" uncertainty? I'm far from a savvy investor, but I've got a decent amount of money in this fund and I'm wondering if this is a good time to get out.....or if I should ride it out a little longer.
Based on my readings, the drop this week seems to be from increase in supply driving the yields up. Some reports also mentioned the widening of credit spreads and I'm not sure if it is related to the anticipated Moody’s ratings decisions on the Commonwealth of Puerto Rico's debt. Other reports mentioned..... Traders Cutting Year End Inventory. It got worse today with the news of MUNICIPALITIES and CITY MAYORS meeting with the PRESIDENT and the MUNI BOND TAX REFORM to be one of the TOPIC.
MOODYS DOWNGRADE has been anticipated and is not something NEW.
Widening of CREDIT SPREADS is a known fact in relation to a recession scenario.
Cutting MUNI'S inventory seems to happen during the year end and again is not something NEW unless there is a massive exit of traders to cut inventories and institutions just sat on the sideline waiting for a much better price.
I tend to believe that the drop is a combination of all of the above weighing more on the traders/inventories and Institutions kept waiting on the sideline. MUNI FUNDS are hungry for good quality high yield MUNIS to preserve the dividends.
..............................Just my opinion ..........................
I have a different take on this. The market has realized that whatever ( if any) arrangements our politicians reach before year-end they will be insignificant for serious deficit reduction. So, in 2013 we might still be talking about the presence of shortfalls across the spectrum of federal and state/local budgets. That, against a backdrop of the possibility that the tax exemption from Muni's might be capped (the 28% rumor) is making that asset-class appear less attractive than before. Uncertain if it is a temporary perception that will go away in a few weeks, but I sure hope so.
Yet, the procrastination with fiscal rectitude since 2004 has started to expose the real problem : lax monetary policy (the Fed) in the form of low-interest rates or QE cannot be the cure, but a pain suspension remedy. Unless and until there is more clarity in "what is in store beyond monetary policy", economic growth (and jobs) will be hard to get. That is our "all too inconvenient" truth.
In the meantime I have stopped paying any attention to the risible finger-pointings and other tales surrounding the Fiscal Cliff. It has become a national distraction dissimulating the real issues.