California is opting out of buying municipal bond insurance for its upcoming $1.75 billion issue, its third straight non-insured bond offering. And investors are paying as much or more for the uninsured bonds in the secondary market, in a sea change for the industry. (MarketWatch) States and cities point out that municipal bonds rarely face default, which they say makes insurance unnecessary, and that the credit rating agencies underrate the bonds and waste taxpayer money. (The New York Times, free registration)