As U.S. Deficit Mounts, Treasury-Muni Relationship Stabilizes

Smith, Aaron T.; Fine, Jacob
May 2003
Bond Buyer;5/7/2003, Vol. 344 Issue 31630, p6
Trade Publication
The U.S. federal government is heading for a massive budget deficit, according to economists. As the rally in Treasury yields has disabled in the face of destined issuance, municipal bond yields have continued to decrease — reverting to more traditional levels relative to Treasuries. The return is largely a result of the dissipated flight-to-quality bid for Treasuries and concern over the federal government's mounting borrowing needs, according to Philip Fischer, municipal market strategist at Merrill Lynch & Co. The Bond Market Association projected a 370 billion dollar federal budget deficit for fiscal 2003, due to changes in tax and spending policies.


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