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 ranged between 5 and 5.25 percent until August. After falling in September, the bond buyer index rose again in October and November approaching 5 percent. The yield on 10-year notes has declined more sharply than municipal bond yields. This means that the muni-bond yield is significantly higher than the 10-year note yield. Some portfolio managers are pointing to muni-bonds as good investment alternatives these days, although default risk on these securities is certainly higher than on a Treasury note.

2-year Treasury Yield & Spread to Fed Funds   •   10-year Treasury Yield & Spread 10-year less 2-year

Yield Spread: Aaa Corporate vs. 10-year Treasury   •   Yield Spread: Baa Corporate vs. 10-year Treasury

Yield Spread: Bond Buyer vs. 10-year Treasury