Munis Got Upended in 2010, and the Outlook Is Mixed
Author: Jeannette Neumann</br></br>The typically placid municipal-bond market was thrown into tumult in the final months of 2010, pushing yields to their highest levels since early 2009 while investors pulled record amounts from muni-bond mutual funds. And the outlook for 2011 is mixed.</br></br>Two of the main factors roiling the muni market were a surge in supply amid uncertainty about a popular bond-subsidy program and rising Treasury rates--which long-term munis tend to track--triggered by the Federal Reserve's bond-buying program, analysts say.</br></br>The yield on 30-year triple-A-rated municipal bonds peaked at 4.85% on Dec. 15, according to a widely watched scale published by Thomson Reuters Municipal Market Data. Those levels on yields were last seen on March 27, 2009. The yield on 10-year triple-A munis also peaked that day at 3.27%, the highest since June 24, 2009, according to MMD. The 30-year closed 2010 at 4.68%, while the 10-year finished at 3.16%.</br></br>Perhaps the biggest overhang on the muni market this past year was the fate of the Build America Bonds program, where state and local governments issued federally subsidized taxable bonds as part of the Obama administration's efforts to reinvigorate a weak economy.