Municipal Bond Yield History
Direct answer: Municipal bonds (munis) are issued by state and local governments and pay interest exempt from federal income tax (and often state/local taxes). The muni-to-Treasury yield ratio is the key valuation metric; ratios above 100% indicate munis are cheap relative to Treasuries on a pre-tax basis. In 2022, the 10-year muni yield rose from 1.1% to 3.8% alongside Treasuries.
10-Year AAA Municipal Yield and Muni/Treasury Ratio
| Date | 10-Yr Muni Yield | 10-Yr Treasury | Muni/Treasury Ratio |
|---|---|---|---|
| Jan 2010 | 3.15% | 3.85% | 82% |
| Jan 2013 | 1.88% | 1.88% | 100% |
| Jan 2016 | 2.04% | 2.10% | 97% |
| Jan 2018 | 2.28% | 2.46% | 93% |
| Jan 2020 | 1.38% | 1.88% | 74% |
| Jan 2021 | 1.12% | 1.09% | 103% |
| Jan 2022 | 1.10% | 1.63% | 67% |
| Oct 2022 | 3.80% | 4.10% | 93% |
| Jan 2024 | 2.65% | 4.00% | 66% |
| Sep 2024 | 2.80% | 3.85% | 73% |
Source: MSRB: Municipal Securities Market Statistics. Last verified: September 2026.
Frequently asked questions
Who benefits most from municipal bonds?
Municipal bonds are most tax-efficient for investors in high federal income tax brackets (32%, 35%, 37%), because the tax exemption is worth more to those paying higher rates. Tax-equivalent yield formula: Muni yield / (1 - marginal tax rate) = taxable equivalent yield. A 3% muni yield for a 37% bracket investor equals a taxable equivalent yield of 3% / (1 - 0.37) = 4.76%. For investors in the 12% bracket: 3% / (1 - 0.12) = 3.41% taxable equivalent -- barely better than the raw muni yield. Municipal bonds are generally not appropriate in tax-advantaged accounts (IRA, 401k) where the tax exemption provides no benefit.
What are the risks of municipal bonds?
Municipal bond risks: (1) credit risk -- municipalities can default (Harrisburg, PA; Detroit, MI; Puerto Rico are notable defaults); AAA/AA-rated munis have very low default rates, but lower-rated munis carry real default risk; (2) liquidity risk -- municipal bonds trade less frequently than Treasuries, widening bid-ask spreads, especially in smaller issuances; (3) interest rate risk -- same as all bonds, rising rates reduce prices; (4) political/budget risk -- changes in state and local government finances affect credit quality; (5) the AMT (Alternative Minimum Tax) affects some private activity muni bonds, eliminating their tax advantage for AMT-subject investors.
What happened to munis in 2022?
The Bloomberg Municipal Index fell approximately -8.5% in 2022, the worst annual return for munis since 1981. The cause: the same interest rate shock that hit all bond markets. Municipal yields rose alongside Treasuries, though from an already low base. The 10-year AAA muni yield rose from 1.1% (Jan 2022) to 3.8% (Oct 2022), a 270 basis point rise, reducing the price of existing munis. Unlike in 2008-2009 (where credit concerns dominated muni losses), the 2022 losses were purely rate-driven: municipal credit quality was strong throughout, with state and local governments holding large budget surpluses accumulated during COVID-era fiscal transfers.