Bloomberg News

Tax-Exempt 30-Year Yields Most Over Treasuries Since 2009

November 23, 2011

(Adds analyst’s comment in fourth paragraph.)

Nov. 22 (Bloomberg) -- Tax-exempt 30-year bond yields exceeded those of Treasuries by the most since April 2009 as concern about contagion from the European debt crisis pushed investors into the safety of U.S. government securities.

Top-rated 30-year municipals yielded 132.4 percent of equivalent Treasuries as of Nov. 21, according to data compiled by Bloomberg. The 30-year U.S. yield fell to 2.94 percent today, the lowest since Oct. 5, and the tax-exempt yield rose to 3.91 percent, the highest since Aug. 9.

Helping cut Treasury yields is the Federal Reserve’s plan to buy longer-term government bonds to lower lending rates, John Hallacy, head of municipal research at Bank of America Merrill Lynch Global Research in New York, said in an interview.

“You’ve had a tremendous rally in Treasuries, given what’s going on in Europe, and the Fed continues to be in buying Treasuries,” Hallacy said. “That’s supporting the market as well, so there’s no way that muni ratios can keep pace.”

The 30-year ratio has increased from 115.3 percent on Nov. 11. It’s averaged 107.5 percent over the last 12 months, and was as high as 221.3 percent on Dec. 19, 2008, after the collapse of Lehman Brothers Holdings Inc., according to data compiled by Bloomberg.

--Editors: Jerry Hart, William Glasgall

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.


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