Municipal Bond Yields Trend Lower

Municipal bond yield indices moved lower during the month, continuing the trend established during the second half of January. Factors contributing to the ongoing rally include the relative dearth of new issue supply, a quiet market overall and an abatement of the deluge of bond fund redemptions of prior months. Generally, investors continued to reach for high-quality bonds during the month. This resulted in lower yields and higher prices in this sector of the market in particular, with wider credit spreads at month end. The market rally led to an approximate 30 basis point yield decline for 10 year maturity, non-taxable municipal bonds during February.

Lastly, the idea of allowing states to file for bankruptcy — which current law does not permit — has been publicly aired and discussed at length in recent weeks. Congress, in fact, held hearings on the topic during the month and it appears the idea has lost traction in Washington, as of this writing.

Ronald P. Bernardi
President and CEO
Bernardi Securities, Inc.
March 2, 2011 

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