Municipal debt issuance tops $500 billion as investors seek tax-exempt yields

Across America, state and local governments sold a record amount of municipal bonds last year, with borrowing surpassing $500 billion and the muni market now worth well over $4 trillion, the New York Times reports. Officials say the sales are financing airports, roads, utilities and other public projects.

The article cites Dallas’s $2 billion bond sale to expand Dallas Fort Worth International Airport and Houston’s billion-dollar renovations to George Bush Intercontinental Airport as examples. "People really don’t understand how big this market is," Mike Bartolotta of Hilltop Securities said, and Houston’s treasury director, Vernon Lewis, said issuing bonds "gives us a more of a cost-saving scenario." Investor demand has surged: issuance is up 57 percent over the past two years, according to Matt Fabian of Municipal Market Analytics.

Wealthier clients are drawn to municipal bonds because returns are generally tax-exempt and can be comparable to stocks in a middling year, the article says. JPMorgan Private Bank estimated that after tax advantages, yields for a typical municipal bond were over 7 percent, while the 10-year Treasury yield has been about 4 percent, and the report notes President Trump disclosed about $100 million in recent municipal and corporate bond purchases.

Analysts and rating agencies warn of risks.

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