That wave of outflows was spurred in part by banking analyst Meredith Whitney incorrectly predicting “hundreds of billions of dollars” of municipal defaults in the 12 months after her December 2010 interview on CBS Corp.’s “60 Minutes.”

The latest streak of withdrawals has been propelled by Detroit filing for the biggest U.S. municipal bankruptcy, said George Friedlander, chief muni strategist at New York-based Citigroup. The yield on benchmark 30-year munis has jumped 0.29 percentage point since the filing and is at the highest level since May 4, 2011, Bloomberg data show.

The taxable-equivalent yield on the AAA munis for the highest earners is about 7.68 percent, more than the 5.43 percent interest rate on BBB corporate securities with a similar maturity.

“The long end has gotten so cheap that we don’t have a problem putting some cash there,” Friedlander said. “We think that the market can rally somewhat from here because we’re going to have much lighter supply the rest of the year.”

Forecast Cut

Citigroup this month reduced its muni issuance projection for the year by 8.6 percent, to $320 billion, because rising yields may deter borrowing. States and localities have sold $200 billion so far this year, down from $224 billion over the same period in 2012, Bloomberg data show.

Longer-maturing munis appear cheap relative to other fixed- income assets and compared with their historical average, John Dillon at Morgan Stanley Wealth Management wrote last week. Yet investors should avoid them in anticipation of “a protracted and uneven ascent toward higher rates,” he said.

“Whether yields rise mildly or wildly, it’s clear that investors are now quite concerned over interest rate risk,” Dillon wrote. He recommended individuals buy debt maturing in five to 11 years.

Other investors are choosing to side with history. The 1.8 percentage points of extra yield from buying benchmark 30-year munis instead of those due in a decade is just 0.09 percentage point away from a record, Bloomberg data show.

Within three months of reaching that peak, the additional yield pickup dropped 40 percent, to 1.13 percentage points.