Municipal Fixed Income Commentary 1Q2010

The Municipal market experienced some significant price volatility during the first quarter of 2010 but ended the period with positive returns. During the first two months of the quarter yields declined and credit spread levels narrowed across the curve off of strong investor demand and low levels of new issue supply. By mid-March, a significant selloff occurred in the high-credit quality sectors market due to a backup in Treasury yields and a wave of seasonal tax selling in preparation for the April 15th tax deadline. As a result, the municipal yield curve experienced some flattening as yield spread between 2 yrs. and 10 yrs. notes and 2 yrs. and 30 yrs. securities declined by 12 bps and 19 bps, respectively.