Investors in search of higher returns and lower taxes are scooping up debt sold by state and local governments, pushing borrowing costs to near-record lows and boosting coffers from California to Connecticut. Investors have poured a net $39 billion into municipal-bond mutual funds this year through Thursday, according to data compiled by Municipal Market Analytics, the most over the same period since 2008. Returns on the debt, which local governments use to fund public works such as sewers or bridges, have beaten those of corporate bonds and Treasurys. … One factor driving recent gains, according to some analysts: State and local governments can’t sell bonds fast enough for investors. … While proposed federal infrastructure spending could ease the jam by putting local policy makers in better position to issue more muni bonds for other projects, many expect new demand for munis from wealthy households if the Biden administration’s plan to raise capital-gains taxes advances in Congress.
Source: Wall Street Journal.
