After years of benign neglect, the municipal bond market is back in the spotlight. Falling interest rates, a volatile stock market and a weakening economy created a resurgence of interest in both issuing and buying muni bonds in the first three quarters of the year.

On the issuer side, long-term bond issuance rose nearly 40 percent between January 1 and September 30, compared with the same period of time last year. As interest rates inched down throughout the year, states and localities came to the market to lower costs on outstanding debt. In the third quarter, refinanced debt accounted for 32 percent of total long-term issuance, up from 18 percent a year earlier. At the same time, new-money bonds climbed to $191 billion in the quarter, an increase of around 37 percent over the previous year.

Short-term bonds may see bigger-than-usual totals for the year. New York City came to market on October 1 with $1 billion in one-year notes to pay for some of the initial terrorist-attack cleanup. The notes will be repaid by promised federal aid. More borrowing by the city is likely.

On the buyer side, one measure of market interest is the amount of money plowed into muni bond mutual funds. That investment grew to nearly $300 billion in August, a rise of 2.5 percent over July and the biggest increase in investment since 1994.