We examine the ability of bond fund managers to shift assets between bonds and cash and across bonds of different maturities in order to capture the changes in their relative returns. As measured by estimated changes in portfolio allocations, we find strong evidence of perverse market timing...

Bond funds report both a distribution yield and a SEC yield, which are roughly analogous to the current yield and yield to maturity on an individual bond. We analyze the quarterly yields reported by municipal bond funds from September 1993 to September 2009. Despite substantial variation in the...