Northern High Yield delivers a big tax-free yield with little risk. By Elizabeth Leary, Contributing Editor December 31, 2006 When it comes to bond funds, high yield is virtually synonymous with junk -- risky, low-quality debt. It's different, though, with many high-yield, tax-free bond funds, as Northern High Yield Municipal demonstrates.The fund, run by Jane McCart since 1998, strives to deliver a reasonably high yield that's exempt from federal income taxes. But McCart is no yield hog. In fact, she has 57% of the fund's $275 million of assets invested in bonds with above-junk ratings. High-yield muni bonds are usually issued to fund specific projects -- construction of a hospital or college facility, for example. McCart, who describes her approach as "conservative high yield," avoids speculative "style du jour" projects, which nowadays include ethanol plants. In its eight years of existence, Northern has experienced just two minor defaults. Results have been in the middle of the pack. Over the past five years to November 1, the fund (symbol NHYMX; 800-637-1380) returned 5.9% annualized, versus 5.8% for all high-yield muni funds. It yields 4.4%, equivalent to a taxable 6.1% for investors in the 28% federal bracket. Another fine choice in this group is T. Rowe Price Tax-Free High Yield (PRFHX; 800-541-8803).