Long Term Perspective
Yields on municipal bonds are lower than on Treasury notes because the interest earned is exempt from federal income tax. The spread is once again narrowing between these two series. It reflects the decreasing supply of Treasuries rather than a worsening of credit quality among municipal bonds.

Short Term Perspective
Yields on municipal bonds have ranged between 5 and 5.25 percent in the past 12 months. Slower economic growth increases the probability of default among municipal bonds. As a result, yields haven't dropped as much as Treasuries.

2-year Treasury Yield & Spread to Fed Funds   •   30-year Treasury Yield & Spread 30-year less 2-year

Yield Spread: AAA Corporate vs. 30-year Treasury   •   Yield Spread: Baa Corporate vs. 30-year Treasury

Yield Spread: Bond Buyer vs. 30-year Treasury