Municipal Bond Prices Drop

Municipal bond prices fell amid lingering concern about Orange County’s bankruptcy filing and rising rates among benchmark government securities, traders said.

“I still think people are afraid there will be another Orange County,” said Paul Hylle, who manages about $1.6 billion in funds at IDS Financial Services.

While few issues traded hands, yields on actively traded bonds rose, traders said. They were tracking the rise in yields on Treasury securities.

Bonds with Orange County names were priced below comparable bonds issued outside the county, traders said, but the difference is getting smaller. And Orange County-insured bonds are being priced as much as 30 basis points higher than non-insured bonds, after going as much as 40 basis points higher last week, traders said.

General obligation municipal bonds maturing in 20 years and rated AA are yielding 6.72%, or 85% of similar Treasury bonds.