Tax-exempt investment-grade municipal bonds as measured by the S&P National AMT-Free Municipal Bond Index have returned 2.41% so far this year, according to S&P Indices’ Vice President of Fixed Income Indices J.R. Rieger. In a research note released Friday, Rieger said that demand for these bonds continues to outstrip supply with municipal bond mutual funds continuing to see cash inflows.
The S&P Municipal High Yield Bond Index returned 4.11% and yielded over 6.9%, with a taxable equivalent yield of over 10.5%. A key driver of this growth in the high-yield market is the health care sector returning over 3.6%, according to Rieger.
For bonds maturing in 2021, those included in the S&P AMT-Free Municipal Series 2021 Index, yield is up 33% over the 10-year Treasury bond at 2.65%. Using a 35% tax rate, according to Rieger, results in a taxable equivalent yield of 4.08% or over double the yield of the 10-year Treasury bond.