Journal Article

The municipal bond market, Part I: politics, taxes, and yields

Abstract: This article assesses recent changes in the structure of the municipal bond market. It reviews the tax legislation, judicial interpretations, and other factors that affect the yield on municipal bonds. These factors are then employed in a statistical analysis of the determinants of municipal bond yields. ; The results of the analysis show that the ratio of yield to maturity on municipal bonds to yields on U.S. Treasury bonds (the interest rate ratio) has varied greatly in the past two decades and is greater for longer maturities. They also show that debate during 1986 about tax reform increased interest rate ratios, suggesting independent evidence for the importance of anticipated future tax rates.

Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: New England Economic Review

Publication Date: 1991

Issue: Sep

Pages: 13-36