I am researching this area as a possible defense against the inevitable rise in interest rates. As part of a balanced portfolio of funds I manage on behalf of a retiree, I am concerned about the duration of one fund, namely, Vanguard Insured LT Tax Exempt. This fund has done extremely well for us but the warning signs are very clear that it's time to trim the sails on the bond funds.

I understand that high-yield corporate bonds absorb interest rate increases fairly well because their prices tend to react somewhat similarly to stocks, i.e., good economy/higher rates = higher prices and vice versa. Does the same hold true in the high-yield municipal sector? Is there an article or two that anyone can point me to?

(It probably seems counter-intuitive to consider switching from an insured to a high-yield muni fund, but this is part of a well-diversified portfolio. Besides, Vanguard is extremely conservative in their bond management so even their high-yield funds stay clear of the obviously dangerous stuff, and they fill in much of the yield gap this leaves versus the competition with their lower costs.)

Kevin