Over the past six weeks, municipal bond yields have retraced half the distance they dropped between early January and mid-October. It has been a fast retreat, and the dominant view in the markets seems to be that it hasn't ended.

The yield to par call on The Bond Buyer's daily Municipal Bond Index dropped 114 basis points from 6.47% on Jan. 8 to 5.33% on Oct. 15 as bond prices rose for nine straight months. Then, amid concern about a stronger economy and renewed inflationary pressure, municipal bond prices fell back, driving the yield on the index from 5.33% to 5.9 1 % last Wednesday, a climb of 58 basis points.

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