Alert December 22, 2010

Bond Market Snapshot

This month, municipal bond spreads continued to recover. The December 2010 yield on AAA-rated municipal bonds increased from 4.55% to 4.89% for 30-year bonds and from 3.14% to 3.38% for 10-year bonds. Yields on treasuries also increased from 4.20% to 4.44% for 30-year bonds and from 2.80% to 3.34% for 10-year notes, staying slightly below the yield on 10-year municipal bonds. Despite the increases in yields, municipal bond mutual funds are still losing investors at historical rates (e.g., $548.1 million sell-off during the week of December 8, 2010), due in part to the impending expiration on December 31, 2010, of the Build America Bonds and other federal subsidy programs.

 Yield Comparison Chart

Source: Bloomberg (www.bloomberg.com)