Over the next month, about $25 billion of municipal debt will be paid off. Bondholders will receive another $13 billion of interest payments in February. And mutual funds have pulled in nearly $7 billion of new cash already this month.
Yet over the next four weeks, only a fraction of that money may find new securities to buy: American states and cities are so far set to sell just $13 billion of bonds in that time, according to data compiled by Bloomberg.
That yawning gap between the amount of cash looking to be reinvested and the amount of new securities being sold is driving the municipal market to new heights. Yields are at the lowest since the 1950s, 30-year munis are hovering around their highest values against Treasuries since at least 2001, and this month’s 1.2% return marks the strongest start to a year since 2016.
(Read more: Bloomberg)