Ten-year Treasury yields may rise to 2.25 percent next year, Zezas forecasts, in line with the median in the Bloomberg survey. For munis to avoid negative total returns in that scenario, the ratio would have to fall to 74 percent, according to Zezas. That would be unprecedented, according to a Bloomberg index beginning in 2001.
“We can’t envision a scenario in which muni yields would hold while U.S. Treasury yields moved that much higher,” he said. “You’d be looking at muni-Treasury ratios that historically have not been observed.”
Following is a pending sale:
CONNECTICUT plans to sell $625 million in special tax- revenue bonds as soon as next week, according to data compiled by Bloomberg. The debt will be used to fund transportation infrastructure. (Added Dec. 6)