Muni Yield Curve Steepness

Historic and current yield spreads for various maturities

Historic and current yield spreads for various maturities

Of note, although the 25/30 year bonds could be outstanding for its full maturing term, the ability to refinance new bond issues at any time in the future tends to keep most municipal bonds from remaining outstanding for their full term. This means an investor can receive a 30 year yield, but may only own the bonds for a portion of this term.


Inflation and credit concerns have the municipal market yield curve at close to its all-time steepness. Muni curve steepness is defined by the percent of difference in yields between short-term and long term maturing bonds. Current yield curve analysis shows this difference is very pronounced, making 25/30 year maturing paper attractive versus shorter maturities. Investors willing to bet against the current inflation scare or buy and hold income sensitive investors, can realize a nice yield pick-up by extending their matur-ity preferences. More specifically, the table below shows the current yield pick-up between different ma-turities and compares them with historic average and historic maximum spreads:

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Posted in Bond Offerings, Economic theories, General

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