Long-Bond Gains Seen Short-Lived as Fed Taper Nears: Muni Credit
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The biggest rally in 30-year state and local debt since June may be fleeting amid signs the Federal Reserve will begin cutting back its bond purchases, leading to higher interest rates.
Investors this week demanded as little as 1.24 percentage points of extra yield to own municipal securities maturing in 2043 rather than those due in a decade, data compiled by Bloomberg show. That was the least in five months. Longer bonds typically offer higher yields to compensate for the added risk of the lengthier holding period, though the gap fluctuates according to the outlook for inflation and interest rates.