Long-End Muni Bonds Offer Cheap Entry Point as Supply Surges

For municipal investors willing to overlook performance concerns, long-dated bonds may offer a cheap entry point into the US state and local debt market as macroeconomic headwinds drag on returns.

Yields on 30-year, top-rated munis stood at about 92% of comparable Treasury rates as of Monday, data compiled by Bloomberg show. State and local debt typically trades at a discount to Treasuries due to its tax-exempt interest.

Worries over rising federal deficits have pushed long-term Treasury yields sharply higher, with the US 30-year rate reaching a near two-decade peak of 5.15% last month. Munis have followed, with long-dated yields ...