"Yield Curve at Towering Heights" writes The Bond Buyer. The article discusses the steepness of the municipal yield curve, saying, "A confluence of factors has yanked short-term rates to the floor. One is that some of the products once vital to the short-term muni sector have imploded. Because obtaining the necessary letter-of-credit backing has become more difficult and expensive, sales of variable-rate debt have tumbled 78.2% so far this year, according to Thomson Reuters.... `[Also], [a]fter a wave failed auctions in 2008, the auction-rate securities sector is moribund." Bond Buyer continues, "The collapse in supply of short-term notes has done nothing to dampen demand, said Jeffery Timlin, a portfolio manager at Sage Advisory Services .... Another curve-steepener: some of the cash that darted for safe havens during the throes of the credit crisis has re-emerged in search of higher returns." It adds, "According to the Federal Reserve, households had $7.88 trillion stored in bank deposits and money market funds at the end of the first quarter. Friedlander has argued for months that money will not stay there forever." Bond Buyer says of fund flows, "Of the 25 funds with the heaviest inflows this year, seven have the word 'ultra-short' in their name, including the top two."
