Municipal Market Monitor

December 31, 2007 — The municipal market just experienced one of the most volatile quarters in recent history. With the repricing of risk that occurred in August due to issues within the mortgage and credit markets, municipals were inadvertently hammered down with the rest of the market. Leveraged players that utilized municipal securities were forced to unwind many of their deals due to the divergence in yield movements between the underlying securities and the hedging vehicle. In addition, liquidity concerns contributed to the lack of interest for municipal securities, which can be a common occurrence for Muni’s during economic turmoil. However, for the astute investor, these events have created great opportunities to invest in the municipal market at tax adjusted yield levels not seen since 2003.