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Yields on Treasury-Backed Muni Bonds Soar to Highest Since 2009

  • Mutual fund selling creates bargains for pre-refunded bonds
  • Bloomberg Barclays Muni Prerefunded Index hits 1.53%

The more than $5 billion exodus from municipal-bond funds in November is creating bargains in an often overlooked corner of the tax-exempt debt market.

An index of municipal bonds that are pre-refunded -- or paid off as they come due with the proceeds of Treasuries that are held in escrow -- yields 1.53 percent, the highest since July 2009. To meet redemptions, mutual-fund mangers are selling the bonds, which are rated AAA because they’re secured by the income from the federal-government debt.