“When these bonds were first issued, it was probably the furthest thing from issuers’ minds that Congress would reduce the subsidy,” McNamara said. “The trust has been breached, but they continue to perform well.”
At 2.01 percent, yields on benchmark 10-year munis have exceeded the interest rate on comparable-maturity Treasuries for nine straight trading days, the longest span since October, Bloomberg data show. The ratio is about 105 percent, compared with an average of about 92 percent since 2001.
The elevated ratio may be attracting crossover buyers such as hedge funds, Nuveen’s Close said. The higher the percentage, the cheaper local bonds are relative to their federal counterparts.
States and cities are set to borrow just $3.5 billion this week, the least since the period through Jan. 4, Bloomberg data show. The smaller supply comes after the market set back-to-back records this year for issuance in the past two weeks.
Following are pending sales:
SAN BERNARDINO COMMUNITY COLLEGE DISTRICT in California is set to sell $280 million of tax-exempt and taxable bonds as soon as this week, Bloomberg data show. Proceeds will be used for refunding. Moody’s Investors Service rates the debt Aa2, third- highest. (Added March 26.)
ILLINOIS plans to issue $800 million of general-obligation bonds via competitive sale April 2, Bloomberg data show. The state postponed a $500 million offer in January after S&P downgraded it to A-, six steps below AAA. Illinois is the company’s lowest-rated U.S. state. (Updated March 26.)