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Michigan Pays 40% More as Detroit Debt Hits Spread: Muni Credit

The yield penalty on Michigan’s debt has climbed 40 percent in less than two weeks as defaults by Detroit and two school districts lead investors to question the state’s commitment to protect bondholders.

Buyers demand about 0.49 percentage point of extra yield to own general obligations of Michigan instead of benchmark securities, data compiled by Bloomberg show. That’s up from 0.35 percentage point on June 13, the day before Detroit emergency financial manager Kevyn Orr released his plan to avert a record municipal bankruptcy. The proposal included halting payments on $2 billion of munis.