These charts shows the spread between mortgage and bond rates as of 09/02/2010 based on weekly data from Freddie Mac and The Bond Buyer as shown on their web sites.
Historically, mortgage rates have been above tax-exempt bond rates. The spread (mortgage rates - bond rates) has been positive for many decades in the past.
Starting on October 09 2008, due to the financial crisis, those old relationships changed and were no longer valid. The spread briefly went negative for the first time in the history of the MRB market. Then, starting on November 27 2008 and for 41 weeks until September 10 2009, municipal rates (as indicated by the Bond Buyer 25 Revenue Bond Index) were higher than Treasuries and higher than mortgage rates. That was an unprecedented nine month period of negative spreads.
For the past 52 weeks the spread has been oscillating between negative and positive spreads. In the past 100 weeks (1 year and 48 weeks) there have been only 31 weeks of positive spreads (see chart).
This is a chart of the recent history since January 2007:
This is a chart of the long history from the start of the Freddie Mac data series in September 1979:
Click on the image to display a full size chart in PDF format.
