The forced selling plaguing municipal bonds has distorted some segments of the market into bizarre contortions.

Three peculiarities in particular - prerefunded bonds yielding higher rates than the Treasuries backing them, corporate-backed munis trading at higher rates than the bonds of the corporations backing them, and higher relative yields on insured bonds implying that insurance detracts from the likelihood of repayment - are anomalies with no plausible explanation other than more people selling than buying.

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