Investors have poured more money into municipal bond funds so far this year than they have in decades, providing the fuel for borrowing by states and cities to fund new bridges, sewers and other state and local projects to a second-straight 10-year high. Municipal bond funds now hold an unprecedented 24% of outstanding debt compared with 16% five years ago, according to Federal Reserve data. The move marks the latest step in a fundamental shift away from a buy-and-hold market where individual investors quietly collect interest year after year. The record levels of borrowing and investing in 2021 are evidence that investors have moved well past their early worries the pandemic would drive a wave of municipal defaults and bankruptcies. Buoyed by stimulus funds, state and local governments issued $301.9 billion of debt for new projects as of Dec. 21, the most in at least a decade.
Source: Wall Street Journal
