Investors in European bonds should prepare for losses, says Pimco co-CEO Mohammed El-Erian. Nonetheless, it’s an exciting time to be an investor, especially for those who keep a sharp eye for well-placed bond offerings.

"The main issue right now is the integrity of the eurozone is getting weaker and weaker as we delay the problem,” El-Erian tells CNBC. “They are simply kicking the can down the road."

"Ultimately there will be a haircut to bonds issued by certain governments in the eurozone, and the longer we delay that recognition the bigger the problem and the more disorderly the process will be."

El-Erian believes U.S. municipal bonds are an especially interesting market now.

"We are in the midst of a massive adjustment in the state and local level that we're going to have to undertake," he says.

"The key issue when you invest in municipals is two things: It's not just in the rate risk, it's interest rate and credit risk, and therefore be highly differentiated. You want to be very high up in the credit curve."

El-Erian also says unemployment has a big impact on markets, and that the Federal Reserve is the sole entity doing anything about it.

Banking analyst Meredith Whitney sharply disagrees with El-Erian, saying that municipal bonds are one of the worst investment buys now.

“February is a critical month for state data,” Whitney tells CNBC. “The data is going to look really bad.”