DTF - Municipal Bonds Show Some Insulation From Rising Rates
The investment grade segment of the tax-exempt US municipal bond market differentiates itself from other US fixed-rate bond markets by typically trading to a spread to a AAA municipal bond yield curve that is created by amalgamating market color from the primary and secondary markets' trading activity in lieu of benchmarking against a government bond yield. There is still significant correlation between the AAA municipal bond yield curve and the US Treasury (UST) yield curve, but municipal bonds yields are often (albeit not always) lower than their equivalent maturity government bonds, given their tax benefit.