municapl bond arbitrage hedge funds are having to rapidly liquidate positions as the banks that lend to them make margin calls. this is because the turmoil with the bond insurers (ambac, mbia, etc..) is causing investors to demand a higher yield on their munis. as the prices fall, the collateral loses value and the banks force liquidation its a viscious cycle. right now some AAA munis are yielding MORE than comparable treasuries.

this is really a buying opportunity as defaults will be low so the insurance doesnt really even matter. its shocking to see this thing fall 5% in three trading sessions.