The Bond Buyer's weekly yield indexes rose dramatically, as tax-exempts grew continuously weaker amidst this week's credit crunch.

"It really is, at this point, a question of balance sheet tolerance for munis. And unless we get a bit more tolerance for munis on the balance sheets, it could continue to get weaker," said Matt Fabian, managing director at Municipal Market Advisors. "That, and sort of fear about [American International Group Inc.], will probably keep munis from doing a sharp rebound like we did in March and August."

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