Downgrading of bond insurers affects market

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These are uncertain times for investors in municipal bonds and bond funds.

Many cities, states and other entities that issue municipal bonds - to finance schools, roads and other public projects - are facing lower revenue as a result of the slowing economy, which could affect their ability to repay their bonds.

Investors who bought munis that offered insurance if the issuer defaulted thought they were getting an extra layer of protection. But now the companies that issued these insurance policies are having their credit ratings cut.

These ratings downgrades have caused the value of insured bonds to decline relative to uninsured bonds and have increased risk and uncertainty in the muni market.

SF Gate