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
The bond buyer index of municipal bonds fell 3 basis points in October even as 10-year Treasury yields edged up 2 basis points during the month. This relationship is still out of whack: 10-year note yields should be higher than municipal bond yields since interest earnings on the latter are free from federal income tax.

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