Volatility Pummels Closed-End Funds

Unusually high volatility levels in recent months helped push down TheStreet.com Ratings grades of the closed-end municipal bond fund group, normally a relatively calm sector.

This volatility was a prime factor in closed-end tax-exempt bond funds dominating the "Most Deteriorated" grouping of the accompanying table of the biggest recent closed-end fund ratings grade changes.

Three of the muni funds in the table's bottom grouping experienced grade changes that demoted them from hold status to sell recommendations. One skidded from buy-recommended territory to a hold recommendation while the fifth, the Neuberger Berman California Intermediate Muni Fund(NBW Quote), slipped from a buy recommendation that was appropriate for its former grade of A- to a weaker buy in line with its April 30 grade of B-.

Uncharacteristically high volatility of returns has plagued the muni funds for months. Concern about the credit ratings of bond insurers, resulting from the credit crunch, were compounded with doubts about exemption of municipal bond dividends from state income taxes. ...