Muni Investors Embrace Junk, Pushing Yields to All-Time Lows

Yields on the riskiest muni bonds have fallen to all-time lows as investors plow-record breaking cash into mutual funds.

Municipal high-yield funds collected $13.7 billion in the first half of the year, according to Refinitiv Lipper US Fund Flows data. The demand has driven borrowing costs on non-rated and junk-rated munis to 2.91%, the lowest ever, according to Bloomberg Barclays Indexes. The extra yield investors demand to compensate for higher risks has narrowed to 2.2 percentage point, the least since November 2007.

“It’s a very attractive market for issuers,” said Lisa Washburn, a managing director at Municipal Market Analytics. ...