) -- Money managers believe the recent sell off of municipal bonds has brought about some investing opportunities.

"We have to get a lot of buyers back. People should be buying, but lot of people right now just don't have that confidence," said John Hallacy, head of municipal research for

Bank of America Merrill Lynch

(BAC) - Get Report

at the Bloomberg State & Municipal Finance Conference in New York Tuesday.

Daniel Solender, partner and director of municipal bond management at Lord Abbett.

Recent calls by by analysts such as Meredith Whitney and Nouriel Roubini that there will be a wave of defaults by municipalities and states has caused investors to pull money out of the municipal bond markets.

"I think like many markets, this one has become near panic. Seventy percent of this market is retail and people were worried. I think there is a general asset allocation away from bonds and toward stocks and Meredith Whitney's prediction just pushed it over the edge," said Cliffford Corso, CEO of

Cutwater Asset Management


Howard Cure, managing director for

Evercore Wealth Management

said he understands Meredith Whitney's concerns over significant municipal bond defaults in 2011.

"The politics have become so toxic that you cannot have rational discussions. The long term implications for the finances has to be addressed," said Cure. "From a bond investor point of view strained politics gives me pause. Even though there haven't been a lot of defaults, there has been real credit deterioration."

"States have to have balanced budgets, and that is something that investors can take comfort in," added Daniel Solender, partner and director of municipal bond market at

Lord Abbett.

Solender added that states cannot declare bankruptcy, and if they had the ability, it would only cost taxpayers more.

"When municipalities move into bankruptcy like Vallejo, California, no one wins," Solender explained.

Standard & Poor's

has said that they do not predict widespread defaults this year or next. "2012 will be a difficult year. You are seeing local governments impacted in ways they have not been before and governments have been standing in their long-term budget obligations," said Robin Prunty, a managing director at S&P.

Municipalities face budget shortfalls of $83 billion by 2012, according to Susan Urahn, managing director of Pew Center On the States. She adds that many states may look to privatize infrastructure projects, delay them or sell assets to balance their budgets. Medication and education are most often the largest and most difficult parts of the budget to cut.

"Fiscal 12 is going to be a difficult year. They have been trimming back and balancing the budget and in fiscal 12 they will be cutting down to the bone," Urahn said.

--Written by Maria Woehr in New York.

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