Brokers aren't the only ones soliciting small investors to buy bonds.  For a change, states increasingly are marketing their securities to mom-and-pop investors - going so far as to tell them it's a "civic duty!"

In the coming weeks, the state of Illinois, following the lead of Ohio and California, will launch a website to spread the word about state-issued municipal bonds.  Connecticut is planning to put up Internet banner ads to lure users to www.buyctbonds.com, the site it launched in 2008.  And Illinois last year joined states such as New York, New Jersey, Maryland, Tennessee and California in allowing individual or "retail" investors to buy bonds ahead of institutional investors.

    Insititutions Negotiating Higher Yields.   What worries states is a pullback of institutional investors such as pension funds and university endowments from the muni market following the expiration of the Build America Bonds (BABS) program in December. The program, launched in 2009, provided federal subsidies to municipalities that issued taxable bonds.

The BABS program drew swaths of new institutional investors, attracted to the bonds' higher yields and longer maturities. Those institutions weren't big players in the market for traditional tax-free munis because they don't pay taxes.  Making matters worse for states, many mutual funds and other big investors who do buy traditional muni bonds are exercising more caution these days, often demanding higher yields to compensate for the added risks.