Muni investors have herded into short-term debt the last few months thinking that if rates rise, longer-term bonds will plummet in value and it will be good to have cash on hand to reinvest at higher rates. But are short-term bonds really such a safe haven?

Some portfolio managers suggest that in many ways, the answer is a clear no. They say the returns on short-term paper are so low that they offer virtually no protection if short rates jump. And if interest rates do climb, it is short-term rates that could swing the most.

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