Breaking News

U.S. May Home Prices Rise 0.4% From Previous Month: FHFA
Tweet TWEET

Munis Cheapest in 7 Months Versus Treasuries on European Crisis

U.S. tax-exempt debt gained in most maturities today while failing to keep pace with rallying Treasuries amid concern that Europe’s debt crisis is deepening.

Ten-year Treasury yields fell to a record low, leaving interest rates on similar-maturity municipals about 119 percent of their federal counterparts. It’s the highest ratio since October, data compiled by Bloomberg show.

Top-rated 10-year munis yielded 1.88 percent at noon in New York, according to data compiled by Bloomberg. Benchmark 10-year Treasury yields fell five basis points, or 0.05 percentage point, to 1.58 percent at 12:30 p.m. New York time. The yield reached as low as a record 1.5309 percent.

“This is the global flight to quality continuing,” said Hardy Manges, head of municipal trading at Mitsubishi UFJ Securities in New York.

Interest rates on AAA tax-exempt debt due in 30 years are also about 119 percent of comparable-maturity federal bonds, the highest since January.

Munis’ relative cheapness to Treasuries may increase demand for tax-exempt debt from buyers of taxable securities, Manges said.

“The cross over trade looks pretty attractive here,” Manges said.

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

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.