Municipal bonds have been getting pounded in recent weeks. Treasury bond yields have risen considerably since the national election, but that’s not the only thing driving the bus, at least for the munis.
The prospect for tax cuts weakens demand for tax-advantaged securities like municipal bonds, while the probability of significant federal support for state and local government finances has declined, compared to what otherwise might have arisen.
How are Chicago bonds faring, in all of this?
The Chicago bonds I watch have been very weak. The yield on one of them hit 5.7% today, up from 4.5% on November 4. Over that time frame, long-term Treasury yields rose from 1.8% to 2.3%, so the spread on those Chicago bond yields over Treasuries widened from 270 basis points to 340 basis points.
Is this a Chicago thing, or does it just reflect the muni market in general?
Looking at Chicago compared to a Bond Buyer muni bond index tool, it looks like a Chicago thing as well. The spread for Chicago bond yields over the Bond Buyer index has more than doubled since November 4, from 58 basis points to 124 basis points.