Tax-Status Threat Fuels Worst Losses Since Whitney: Muni Credit
This article is for subscribers only.
The $3.7 trillion municipal market is poised for its steepest monthly decline since 2010 as investors spooked by threats to the debt’s tax-exempt status withdrew the most money in almost two years.
Demand from individual buyers, who own about 70 percent of U.S. local debt, collapsed last week as yields set four-decade lows. At the same time, talks between President Barack Obama and congressional leaders over a deal to avert tax increases and spending cuts set to start in January included measures that may cap munis’ tax exemption. Investors pulled $2.3 billion from muni mutual funds this week, the biggest exodus since January 2011, Lipper US Fund Flows data show.