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Bargains at the long end of the municipal bond curve


I just read your timely article, “What’s In Store For Municipal Bonds This Year” and noticed you mentioned that munis are currently a bargain. Over the last several years the AAA-muni to 10-year-Treasury ratio has ranged from the low 80s to over 100. It is currently in the low 80s. Wouldn’t that make munis, at least vs. Treasuries, expensive at this time?

L.C., California


James A. Klotz responds:

Your observation is correct: 10-year AAA munis are probably not a bargain. As our clients and others who regularly read our articles know, we are proponents of long-term bonds as opposed to 10-year ladders or 10-year maturities.

At the long end of the curve, A-rated and AA-insured bonds can be purchased at well over 100% of the 30-year Treasury bond. We are not aware of many individual investors buying 10-year AAA bonds.

Jan 23, 2018

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