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NEW YORK (TheStreet) -- Colossal concerns about the municipal bond market caused by Meredith Whitney's December warnings on 60 Minutes may have passed, but states still have a lot of work to do to get their fiscal houses in order, says Timothy Pynchon, manager of the Pioneer High-Income Municipal Fund (PIMAX) - Get Pioneer High Income Municipal A Report.

The $655 million mutual fund, which garners two of five stars from

Morningstar

(MORN) - Get Morningstar, Inc. Report

, has returned 1.6% over the past year, better than 86% of its peers. During the past three years, the Pioneer High Income Municipal Fund has risen an average of 0.5% annually, putting it in Morningstar's 73rd percentile for high-yield municipal bond funds.

Welcome to

TheStreet's

Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.

Is the Meredith Whitney-fueled municipal-bond scare over?

Pynchon:

What we have seen is a tremendous amount of value scraped off our marketplace. We have seen an overselling of our marketplace. And now we are full of value. I would say we are not there from a trading standpoint but we are there from a value standpoint. As we look forward to 2011, we can expect a lot of value in the marketplace.

Where are the best places to find yield right now?

Pynchon:

I don't target any one state or single municipality. I look at project revenue bonds coming from so-called weak states like Florida, Michigan, California and New Jersey. And I can find good bonds in Texas or West Virginia, which are considered the stronger states. I go where I can find value and that can take me virtually anywhere in the country.

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Are you avoiding any types of municipal bonds now?

Pynchon:

I have made it a point of avoiding the large residential development deals that have now represented $3 billion in defaults in our municipal market. That's one sector that I have just avoided entirely. I like health care. I like airports. I like corporate-backed bonds. Those are areas that I continue to seek out, and if it is a good fit for the portfolio, I will add more during the course of the year.

Might there be a federal bailout of a state or municipality in 2011 or 2012?

Pynchon:

I think if push came to shove, the government would step in to bail out a state. However, I don't think that will be a necessity in the next few years. I think that the states are now taking the necessary steps to get their fiscal houses in order. And that's the process that we are seeing in places like California, Illinois and New Jersey. I don't think we are going to have to test that over the course of the next couple years.

As a muni-bond fund manager, do you support the actions of governors like Scott Walker in Wisconsin in his battles with unions?

Pynchon:

I take exception to some things like his attacks on the collective-bargaining agreement. But as far as his making difficult budget choices, I am absolutely in support of that. As a nation, we have been fat and happy for a long time, and we have become fiscally lazy. Now we are paying the piper. And because Americans have become complacent over time, it is going to be painful, but these painful steps are necessary if we are going to get our fiscal house in order.

-- Reported by Gregg Greenberg in New York.

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