Municipal Bond Forum
Bargains at the long end of the municipal bond curve
Q
I just read your timely article, “What’s In Store For Municipal Bonds This Year” and noticed you mentioned that munis are currently a bargain. Over the last several years the AAA-muni to 10-year-Treasury ratio has ranged from the low 80s to over 100. It is currently in the low 80s. Wouldn’t that make munis, at least vs. Treasuries, expensive at this time?
A
James A. Klotz responds:
Your observation is correct: 10-year AAA munis are probably not a bargain. As our clients and others who regularly read our articles know, we are proponents of long-term bonds as opposed to 10-year ladders or 10-year maturities.
At the long end of the curve, A-rated and AA-insured bonds can be purchased at well over 100% of the 30-year Treasury bond. We are not aware of many individual investors buying 10-year AAA bonds.
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