Municipal Bonds: Yeeeeaaaaahooooooo!

Municipal bond yields are falling fast after hitting record highs versus Treasury bonds on Friday. Late last week, municipal arbitrage funds were being hit with margin calls, as their hedges were rapidly moving against them. This lead to billions of dollars in forced selling, which when pushed on the relatively illiquid municipal market, caused prices to plummet. On Friday, high quality municipals were widely available at spreads of 100bps or more above Treasury rates. Typically municipals yield about 80% of Treasury rates….
Original Source

  6 March, 2008| Economy | @ 21:21

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