Reminiscent of some of the recent warnings from famed analyst Meredith Whitney, the chief executive of J.P. Morgan (NYSE: JPM) Jamie Dimon said he thinks more municipalities will face bankruptcies this year.

As a consequence, he urges investors to exercise extreme caution with respect to the muni bond market.

There have been six or seven municipal bankruptcies already, Dimon said at his company's annual health-care conference in San Francisco. I think unfortunately you will see more.

According to press reports, five municipalities filed for bankruptcy in 2010, down from ten in the previous year. The biggest such failure last year concerned a South Carolina toll road which had piled up more than $300 million in debt.

Rumors have abounded that certain particularly cash-starved cities, including Harrisburg, Pa. and Detroit, Mich. are mulling bankruptcy filings.

All told, state governments in the U.S. are facing deficits of about $140-billion this year, according to the Center on Budget and Policy Priorities, with California and Illinois believed to be in the worst shape.

Yields on muni bonds have surged over the past few months as U.S. Treasuries sold off and the Build America Bond program expired.

“If you are an investor in municipals you should be very, very careful,” Dimon said at the conference.

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