Abstract
A recent study by McInish of the influence of term-to-maturity on municipal bond default risk premia concluded that default risk premia were not invariant with respect to maturity. That study, as well as an earlier one by Robinson, failed to consider the effects of issuer credit quality. Using a large cross-sectional sample of general obligation bonds sold between 1977 and 1980, the influence of issuer credit quality on the relationship between term-to-maturity and default risk premia is investigated. The results indicate that default risk premia were an increasing function of maturity, and that this effect was larger for lower rated bonds.
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