Rieger Report: Municipal Bonds v. U.S. Treasury & Corporate Bonds

Municipal Bond Market Underperforms

  • Even though munis compared to U.S. corporate bonds have underperformed so far in 2019, yields for investment grade munis have lost some luster v. U.S. Treasuries and high quality corporate bonds.
  • The muni/U.S. Treasury yield ratio on the long end of the AAA muni curve was about 105% of U.S. Treasury yields in December 2018, that ratio is now 95-96% which means munis relative to U.S. Treasuries have lost some appeal.
  • The short end of the muni curve and extending into the intermediate range of the curve for investment grade municipal bonds has been rich relative to U.S. Treasury Bonds, S&P 500 Dividend Yield and corporate bond yields. That has been exasperated in March as yields and spreads on the short end continue to widen in favor taxable bond alternatives.
  • Pension obligation shortfalls: While there has been no significant underperformance in 2019, yields for Illinois general obligation bonds are showing a penalty in the marketplace with the S&P Municipal Bond Illinois G.O. Index yielding 3.25% while the S&P Municipal Bond State G.O. Index yields 2.37%.

Source: S&P Dow Jones Indices, LLC. Data as 3/15/2019.

Select Asset Class Total Returns & Yields Year-to-Date


Source: S&P Dow Jones Indices, LLC. 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 3/15/2019.


Sources: IHS Markit (Municipal bond yields), S&P Dow Jones Indices, LLC and the U.S. Department of Treasury. Chart is provided for illustrative purposes only. Past performance is not a guarantee of future results. Data as 3/15/2019.


Sources: IHS Markit (Municipal bond yields) and Exchange Data International (Apple Inc. bond yields.) 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 of 3/15/2019.

Data Resources Used in this Report:


  • Taxable Equivalent Yield = Tax Exempt Yield / (1 – Federal Tax Rate)
  • 2019 tax brackets, however not all tax brackets are represented herein
  • End of day yields are used

Analyst Disclosure:

  • At the time of this writing, JR Rieger owns individual municipal bonds and a municipal bond fund. JR does not own bonds issued by Apple Inc.

Click here for a print friendly copy of this report.

Copyright © 2019 Rieger Report LLC. All rights reserved. Redistribution in whole or in part is prohibited without written permission of the Rieger Report LLC. All information provided by the Rieger Report LLC is for informational purposes only, impersonal, and not tailored to the needs of any person, entity or group or persons. It should not be considered financial advice. The Rieger Report LLC receives compensation in connection with licensing its research, advertising on its website, speaking and consulting services.
Past performance of any investment product or index referenced in the Rieger Report is not an indication of or guarantee of future results.
The Rieger Report LLC is not an investment advisor, and the Rieger Report LLC makes no representation regarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment fund or other investment vehicle should not be made in reliance on any statements set forth in this document. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or other investment product or vehicle. A financial advisor should be contacted to determine what may be best for your individual needs. The Rieger Report LLC is not a financial or tax advisor. A tax advisor should be consulted to evaluate the impact of any tax-exempt securities on portfolios and the tax consequences of making any particular investment decision. No legal relationship is created between you and Rieger Report LLC.
The Rieger Report LLC does not act as a fiduciary or investment advisor. While the Rieger Report LLC has obtained information from sources it believes to be reliable, the Rieger Report LLC does not perform any audit or undertake verification of any information it receives.
The Rieger Report Rankings are opinions of relative ranking among the peer group analyzed as of the date expressed and not statements of facts. Rieger Report model portfolios are intended for illustration only. Any opinion or analysis decisions are not to be construed as recommendations to purchase, hold or sell any securities or to make any investment decisions, and do not address the suitability of any security. The Rieger Report LLC does not assume any obligation to update the content in this publication in any form or format.
Your use of any information from this document or presentation is at your own risk and without recourse against Rieger Report LLC, its members, managers, or employees. To the maximum extent permitted by law, Rieger Report LLC disclaims any and all liability in the event any information, commentary, analysis, and/or opinions prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.