From 1937 to 1965, highly rated municipal bond rates ranged from a low of 0.92 percent in March 1946 to a peak of 3.46 percent in September 1959, according to the Federal Reserve Bank of St. Louis. Municipal bond yields peaked above 12 percent in the 1980s, according to LearnBonds.com.
As of July 2015, the yield on a AAA-rated 20-year municipal bond is over 3 percent, whereas the yield in July 2013 was above 4.5 percent, according to Yahoo! Finance and WM Financial Strategies. 2015 rates are within range of the 1937 to 1965 high yield, even though yields have steadily fallen for the 24-month period ended July 2015.
Municipal bonds are loans made to government entities such as cities and states. In most cases, interest paid on municipal securities is not taxable at the federal level, according to Fidelity. State and local taxes may not apply if the bond is made by the state or locality charging the tax. Because of the potential tax benefits, municipal bonds may be a better investment that U.S. Treasury bonds even if Treasury bonds have a higher stated yield, states LearnBonds.com. During the early 2010s, Treasury bonds temporarily paid lower yields on average than municipal bonds, according to LearnBonds.com, making municipal bonds more financially attractive than Treasury bonds.