The municipal market rallied Thursday, with yields declining at least 10 basis points across the curve against a backdrop of the Federal Reserve’s announcement that it would purchase up to $500 billion of short-term municipal notes.
While the announcement signaled the Fed would prop up short-term munis, long-term bonds are not going to be a part of the programs, at least for now.
Many participants said the shift to a more constructive tone was based more on the fundamentals of the municipal market itself than the news that the Fed would selectively purchase up to 24-month securities from states — whose officials would then select which cities would have access to the programs.
(Read more: The Bond Buyer)
