Compared to U.S. corporate bonds, municipal bonds have underperformed so far in 2019. Yields of corporate bonds have moved lower in sync with U.S. Treasury yields while municipal bond yields have moved less.
Robust new issue municipal supply, while readily absorbed by the muni market, may be a factor in holding municipal yields up during this period.
In the short end of the curve and extending into the intermediate range of the curve investment grade municipal bonds remain rich relative to U.S. Treasury Bonds, S&P 500 Dividend Yield and corporate bond yields.
AA rated municipal bond yields indicate relative value v. corporate bonds beginning in the 12- 15 year range and extending out longer on the curve.
Pension obligation shortfalls: At this time, there does not seem to appear a significant market penalty for Illinois, Connecticut and New Jersey G.O.s due to their pension shortfalls.
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Source: S&P Dow Jones Indices. Table is provided for illustrative purposes only. Past performance is not a guarantee of future results. TEY = Taxable Equivalent Yield calculated at assumed tax rate indicated. Data as 2/8/2019.
Sources: BondWave and Exchange Data International. Chart is provided for illustrative purposes only. Past performance is not a guarantee of future results. TEY = Taxable Equivalent Yield calculated at assumed tax rates indicated. Data as 2/8/2019.
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