Municipal Bonds have been quietly recovering Lost Ground since the 2010 end of the year selloff that hit bottom around January 14, 2011. A recent Wall Street Journal article reminds us that some bonds have recovered to levels unseen since the November 2010 sell off. Yields on the 10 year AAA municipal bond benchmark fell to 2.62% on Monday. Net withdrawals from municipal bond mutual funds are still occurring, but at the lowest level so far.
Longer-term Muni bonds haven’t rallied as much as shorter-term bonds. As mentioned previously, very few municipal bonds have been issued this year. Less than 50% new municipal bond issuance, when compared to 2010.
There have been 14 defaults this year through April 2011, compared to 32 in 2010.
Examined the chart below for the Vanguard intermediate term tax-exempt fund and you will see that investors that road out the turbulence, are almost back to normal. It is time to start thinking about your asset allocation and whether you’re comfortable with your municipal bond allocation.