Stung by reports of corporate wrongdoing, investors are seeking a safer place to put their money, and many of them are heading for the muni market. "Investors poured an additional $1.8 billion into municipal bond mutual funds in June, setting the industry on pace for its best year in almost a decade," reports Amy B. Resnick, editor of the Bond Buyer.
Investor demand sent muni-bond interest rates down to record lows this summer, making it relatively easy, says Michael Decker, senior vice president at the Bond Market Association, "for issuers to find buyers for their large volume of issuance this year at attractive rates."
Even places with relatively low bond ratings have benefited. Detroit, for instance, sold with ease a $56 million issue right after WorldCom revealed its fraudulent accounting practices. Overall, states and localities issued more debt in the first half of 2002 than in any other similar period. If that rate of activity continues, issuance will top out at $300 billion by the end of the year, which would break the record of $292 billion set a decade ago. Short-term borrowing is also up. It increased more than 25 percent in the first half of the year.
