U.S. Municipal Bond Market Shrinks as States, Cities Cut Debt

U.S. states and local governments kept paying down debt during the first three months of 2012, contributing to a bond-market drought that has helped fuel a rally in the municipal securities market.

The Federal Reserve Board today said that state and local government debt shrank at a 1.8 percent annual rate from January through March, the fourth quarterly drop in the last 15 months. That cut the size of the municipal bond market by $11.3 billion to $3.73 trillion.

To contact the reporter on this story: William Selway in Washington at wselway@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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