Municipal Fixed Income Commentary 2Q2010

Despite the rise in yields during June, the Municipal market ended the second quarter with positive returns across the yield curve. Limited supply and attractive after-tax yield levels of municipal bonds versus Treasuries helped boost investor demand and sustain these returns. The month of June did end up being an anomaly from a flow of funds perspective. Municipal issuance declined by -13.5% (YOY) compared to 2009 issuance as significant principal and income payments were not reinvested like expected.