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Short-Term Munis Are Paying Highest Yields Since December 2007

  • One-year muni yields topped 3% last week, highest since 2007
  • Flat curve reduces benefit to investors of investing longer
Contractors work on a portion of Highway 101 under construction in Petaluma, California.

Contractors work on a portion of Highway 101 under construction in Petaluma, California.

Photographer: David Paul Morris/Bloomberg

The last time one-year municipal bond yields were this high, Alicia Keys was at the top of the Billboard charts, the New England Patriots were on their way to a perfect regular season and George W. Bush was president. 

The Federal Reserve’s campaign to stamp out inflation has driven yields on top-rated one-year munis to around 3%, close to the highest since December 2007, and investors should take notice, according to Western Asset Management Co.