by Calculated Risk on 3/01/2008 01:20:00 AM

This is pretty amazing. Check out the graph at the WSJ!

From the WSJ: Hedge Funds' Fire Sales Send Muni-Bond Yields To Historic High Levels

Months of turmoil in the municipal-bond market, long a placid haven for individual investors, reached a boiling point Friday -- as hedge funds were forced to unwind complicated bets and in the process dump billions of dollars of the securities.

As a result of that surprising forced selling, yields on debt from municipalities and other tax-exempt issuers jumped to their highest levels in history, when compared with safe debt issued by the U.S. government. The average AAA-rated, 30-year municipal bond yielded 5.14% Friday afternoon, compared with 4.42% on a U.S. Treasury 30-year bond.

I checked with Schwab tonight, and they are offering some AAA 30-year munis yielding close to 5.5%, and some AAA 10-year munis at 4.4%. Talk about a liquidity crisis!