Municipal Yields Fall to Five-Week Low on Demand for Safety
November 10, 2011, 8:59 AM ESTBy Andrea Riquier
Nov. 9 (Bloomberg) -- Municipal bonds rallied, pushing yields to a five-week low, as investors sought safety in U.S. Treasuries amid concern that European governments won’t make spending cuts to avoid bond defaults.
The yield on benchmark 10-year tax-exempt bonds dropped to 2.26 percent at noon in New York from 2.3 yesterday, according to a Bloomberg Valuation Index. It’s the lowest since Oct. 5, when yields touched 2.2 percent. Yields on Treasuries with similar maturity dropped the most in a week, to 1.98 percent.
“A good amount is due to the pick-up in Treasuries,” Jason Hannon, a trader at New York-based Arbor Research & Trading Inc., said in a telephone interview.
U.S. government debt rose as borrowing costs soared in Italy amid uncertainty the country and Greece will implement austerity measures considered necessary to head off bond defaults.
Ten-year municipals yielded 110.0 percent of comparable Treasury yields yesterday, down from 113.9 percent the previous day. The ratio, used to gauge relative value of two bonds, has been below 100 percent only once since Aug. 29, the longest such stretch since 2009.
--With assistance from Michelle Kaske in New York. Editors: Jerry Hart, William Glasgall
To contact the reporter on this story: Andrea Riquier in New York at ariquier@bloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net
