RT Journal Article
SR Electronic
T1 What Makes the Municipal Yield Curve Rise?
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 65
OP 71
DO 10.3905/JFI.2009.18.3.065
VO 18
IS 3
A1 Andrew J. Kalotay
A1 Michael P. Dorigan
YR 2008
UL https://pm-research.com/content/18/3/65.abstract
AB It is well known that municipal yield curves are always upward sloping. The authors provide a straightforward explanation for this phenomenon. Previous researchers have apparently overlooked that the tax-exempt yields under consideration come from bonds callable after 10 years at, or close to, par. The authors show that as long as the yields are based on such callable bonds, the curve will always be upward sloping, regardless of the shape of the underlying optionless yield curve.TOPICS: Fixed-income portfolio management, legal/regulatory/public policy, accounting and ratio analysis