Cities Fixing Budgets Prove Haven Amid U.S. Impasse: Muni Credit

Municipal bonds are rallying the most in six months against federal debt, showing how bolstered local-government budgets are making city and state borrowings a haven from political turmoil over a possible U.S. default.

While interest rates on 12-month Treasuries have almost doubled since the U.S. shutdown began Oct. 1, yields on AAA munis maturing in a year have dropped. The ratio of the yields, a measure of relative value, fell to about 208 percent yesterday from 370 percent Sept. 30, data compiled by Bloomberg show. The narrowest gap since April indicates that state and city bonds have grown more expensive.