The Wall Street Journal had an article on November 15, 2010 covering Long-term Municipal Bond Volatility. The AAA rated 30 year municipal bond index yield jumped 0.15 percentage points from the prior week. Price moves inversely with yield, and has continued to fall even today.
Reasons cited include:
- A big chunk of New bonds coming to market (including California)
- Worries about the borrowers walking away from debts
- Future influence of Republicans who may lessen money flow to states and extend Bush era tax rates
- The Build America bond program ending possibly 12/31/2010
- The Federal Reserve’s QE2 program. Investors sold older bonds to make room for newer ones.
- Investors selling bonds to take a profit
- Optimism over the possibility that tax cuts may be extended