Stephen Wasdick, a spokesman for Ace, declined to comment on why the insurer has boosted its muni investments.

CNA Financial Corp., a Chicago-based insurance holding company majority-owned by Loews Corp., invested $500 million in the securities from April through June and may invest $500 million more before the end of this month, said James Anderson, senior vice president for financial planning. The company tends to buy local debt maturing in at least 20 years, he said.

“The combination of being able to lock in the higher yields for such a long period of time, which matches our liabilities, makes it very attractive,” Anderson said.

CNA’s second-quarter investments in munis brought its holdings in the securities to $10.1 billion as of June 30, regulatory filings show.

Muni Magnetism

Buyers of U.S. Treasuries and taxable corporate debt are also investing in munis for their higher relative yields, Justin Hoogendoorn, a managing director at BMO Capital Markets in Chicago, said in a Sept. 4 report. “Our trading desk has seen increased purchase activity from crossover buyers, likely due to these valuations,” he said.

The 4.76 percent yield on benchmark 30-year munis compares with an almost 3.9 percent rate for Treasuries with similar maturity, data compiled by Bloomberg show. The ratio of the yields reached 122 percent yesterday, up from about 89 percent on Jan. 3 as muni prices have fallen relative to U.S. government debt. In the past week, that proportion has hovered near a level last reached in December 2011, according to the data.

Negative headlines in recent months have fueled withdrawals from muni-focused mutual funds, Hoogendoorn said. Detroit’s record bankruptcy filing July 18 led to delays in bond offerings by Michigan issuers amid concerns that defaults may increase in cities burdened with unfunded liabilities and rising costs.

Fund Drops

The exchange-traded iShares National AMT-Free Municipal Bond Fund fell 9.7 percent from April 30 through yesterday, when it closed at $101.03 a share, its lowest closing price since April 2011. By comparison, it dropped 12 percent from Sept. 9, 2008, less than a week before Lehman Brothers Holdings Inc.’s bankruptcy filing, to Oct. 10 of that year, when the U.S. announced plans to prop up Wall Street banks by buying shares.