Municipal bonds, once a safe-haven investment only to be branded risky by many experts in wake of the Great Recession, have held up despite famously bearish calls, but they're not out of the woods yet, says George Friedlander, senior municipal securities strategist at Citigroup.

Star Wall Street analyst Meredith Whitney said late in 2010 that municipal debt defaults could reach into the hundreds of billions of dollars.

Such widespread financial chaos hasn't happened, but budget cuts at the local level and economic uncertainty may still strain municipal public finances, experts say.
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"There's going to be lots and lots of screaming," George Friedlander tells CNBC.

"The ability to provide basic services is impaired and that's going to mean lots and lots of battles between governments and public employees, and those will be played out in the press. They will make some investors nervous."

Meredith Whitney (Associated Press photo)

Still, problems won't reach levels predicted by Whitney, whose comments made on "60 Minutes" spooked markets.

"We're going to see a handful of middle-sized or smaller communities have true credit crises, but only a handful," Friedlander says.

"We are going to see more downgrades, particularly in single-A (general obligation) on down. But still a very, very limited number of defaults."

Other experts agree that fears of a massive muni meltdown were a bit overblown.

"Earlier this year, some of the selling in munis was a little bit extreme," says Ronald Schwartz, managing director at StableRiver Capital Management in Orlando and manager of the RidgeWorth Investment Grade Tax-Exempt Bond Fund, according to CNNMoney.

"Investors have realized that high-quality municipal bonds are still very secure."