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State-Local Governments Proving Market Doubts Wrong: Muni Credit

U.S. municipal bond yields are back to where they were in 1967, defying forecasts that the $3.7 trillion market’s biggest rally in three years was near an end.

States and cities are refunding the most debt in at least five years. As a result, investors have fewer new bonds to purchase even as the largest wave of money in two years is surging into muni mutual funds. The appetite for the safety of local-government debt has grown since March on signs the U.S. economic rebound is cooling while state finances improve.