The bond market had a spectacular year in 1993. Prices peaked on the 30-year Treasury bond, with a yield of 5.79%. Municipal market volume hit $290 billion, shattering the $235 billion record set just the year before.

A year ago we thought that interest rates would generally rise in 1994, and that supply in the municipal market would decline substantially, to about $150 billion to $160 billion. We also argued that, because of record volume, municipals underperformed fixed-income alternatives in 1993 and were well positioned to outperform in 1994.

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