Municipal Bonds Market Yields | FMSbonds.com (2024)

FAQs

What is the current yield of municipal bonds? ›

The current yield is ~4.35%.

Average Return on Municipal Bonds – 2.12%

The Bloomberg Municipal Bond Index is generally considered to be the municipal bond benchmark. Over the past 10 years it has averaged a 2.12% average annual return, although that figure has fluctuated from a 9.6% high to a -2.6% loss.

Municipal bonds, like all bonds, pose interest rate risk. The longer the term of the bond, the greater the risk. If interest rates rise during the term of your bond, you're losing out on a better rate. This will also cause the bond you are holding to decline in value.

High-yield munis differ from investment-grade municipal bonds because they have credit ratings that are below investment-grade, or have no credit rating at all. Lower credit ratings mean high-yield bond issuers are considered more vulnerable to missing interest payments or even failing to repay principal.

Recent market update

The broad muni index is almost flat for the year, but it's outperforming the Bloomberg US Aggregate Bond Index, Treasuries, and investment-grade corporate bonds.

Nuveen, a TIAA company, maintains yields for municipals remain attractive despite a strong rally in November 2023. The company believes demand for municipal bonds could increase in 2024 as investors gain conviction that the Fed has ended its rate hikes. Nuveen expects the Fed to cut rates by 150 basis points in 2024.

What is the outlook for municipal bonds in 2024? ›

We believe the municipal market is poised for improvement in 2024. The Fed's anticipated easing this year should bolster demand for municipal bonds. If investor sentiment shifts positively, as we expect, strengthening demand could absorb secondary market supply and act as a catalyst for spread tightening.

The price and yield (the income return on an investment) of a bond generally have an inverse relationship. In other words, as the price of a bond goes down, the yield goes up and vice versa. Thus, when interest rates rise, a bond's price usually declines because an investor can earn a higher yield with another bond.

Generally fixed rate municipal bonds pay interest on a semiannual basis such as on June 30 and December 31 of each year. However, municipal bonds can have different payment periods and dates, such as an annual payment.

True interest cost includes all ancillary fees and costs, such as finance charges, possible late fees, discount points, and prepaid interest, along with factors related to the time value of money (TMV). Because TIC is commonly used in municipal bond offerings, it also may mean the "actual cost" of issuing a bond.

In a current refunding, the proceeds of the refunding bonds are applied to pay the principal, interest and any redemption premium on the refunded bonds within 90 days of the date the refunding bonds are issued.

10 Year Treasury Rate is at 4.51%, compared to 4.55% the previous market day and 3.61% last year. This is higher than the long term average of 4.25%.

Munis offer more value relative to bonds with similar risks

In the search for yield, municipal bonds shine relative to similar, lower-risk fixed income such as Treasuries, as well as investment grade bonds.