Rieger Report®: Geopolitical Risk Overtakes Bond Markets

Municipal Bond Market: Risk/Volatility Emerges

  • Geopolitical risk overtakes markets driving yields for “risk off” asset classes down.
  • Compared to the 1.85% dividend yield of the SPDR S&P 500 ETF, AAA munis remain rich from the short end to about 20 years out on the curve.
  • Compared to corporate bonds, such as Apple Inc. bond issues, AAA munis have been driven into extremely rich territory across the curve, even for the higher tax brackets.
  • 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 ended August 14, 2019 at 94% illustrating that munis are still pricey relative to U.S. Treasury bonds.
  • Pension obligation shortfall impact: (Key states to watch: Illinois, Connecticut, New Jersey & Rhode Island)

Source: S&P Dow Jones Indices, LLC. Data as 8/14/2019.

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


Sources: iShares by BlackRock, SPDRs. 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 8/14/2019.


Sources: IHS Markit (Municipal bond yields), SPDR 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 8/14/2019.


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 8/14/2019.

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.

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