The U.S. financial markets continued to struggle in the first quarter due to a slowing economy, nearly frozen credit markets and declining home prices. Investors continued to favor Treasuries, which negatively impacted the municipal bond market. Another contributing factor to the decline in Treasury yields was the Federal Reserve Bank’s purchase of Treasuries in an effort to bring down borrowing costs. The yield ratio of AAA-rated 10-year municipals to that of comparable 10-year Treasury securities ended the first quarter of 2009 at 127 percent. By the end of February, 2009, the ratio fell to 114 percent, which was still above the pre-crisis average of 85 percent in 2007. AAA-rated municipal bond yields ended 4Q’08 at 3.45 percent, down from 3.91 percent at the end of December and 3.79 percent at the end of the same year-earlier period.

About the Report

The municipal bond credit report is a quarterly report on the trends and statistics of U.S. municipal bond market, both taxable and tax-exempt. Issuance volumes, outstanding, credit spreads, rating changes, highlights and commentary are included.

Credits

SIFMA Research

• Managing Director, Director of Research: Kyle Brandon
• Research Analyst: Paul Rainy

Municipal Division

• Managing Director, Associate General Counsel, Co-Head: Leslie Norwood