NEW YORK — Municipal bond yields have surged 15 basis points, with longest-dated securities now trading at their highest levels since 2011, as rising Treasury rates collide with heavy new issuance.
The move reflects a classic duration squeeze: as benchmark Treasuries climb, the yield curve steepens and new municipal supply pressures valuations at the long end. Investors are backing up the curve, demanding higher yields to absorb the calendar of incoming deals.
The AA General Obligation segment, which anchors much of the muni complex, has borne the brunt of the selloff. Tax-equivalent yields for top-bracket investors—calculated at the 40.8 percent tax rate that governs the Muni-UST ratio—now offer compelling carry for those with the balance-sheet capacity to extend duration.
