“You get a big pickup for similarly-rated credit,” she said.

Banks Buying

Banks may also be buying. Their muni-debt holdings rose for the first time since 2017 during the third quarter, marking a shift from the record retreat they had made from the market as Trump’s tax cut lessened their interest in traditional state and local government bonds, according to research firm Municipal Market Analytics. Foreign investors facing negative interest rates overseas have also boosted their holdings.

The interest is coming as corporate-bond buyers try to improve the credit quality of their portfolios amid concerns about economic growth and the large pile of debt many businesses have amassed. And there’s a dearth of highly-rated corporate issuers: the Bloomberg Barclays AAA rated long-dated corporate bond index includes just Microsoft and Johnson & Johnson, while the remainder in the index are colleges that sold debt with a corporate bond ticker rather than a municipal one.

It also helps that buyers of taxable municipals won’t have to worry about mergers or share buybacks negatively affecting the value of their holdings, according to Loop Capital. And between 1970 and 2018, municipal bonds rated by Moody’s Investors Service had a default rate of 0.09%, compared to a global corporate default rate of over 6%. The securities have also returned about 12% this year, almost as much as the 14% for the corporate debt market, according to Bloomberg Barclays indexes.

“The attributes to the muni asset class resonate,” said Scott Sprauer, a managing director for MacKay Shields. He said insurance companies, pension plans and endowments are interested in taxable munis.

Expertise Draw

USAA Investments, which is a franchise of Victory Capital with over $40 billion in assets under management, is drawing on the expertise of its municipal-bond team as it looks to diversify away from corporate credit, said John Spear, the chief investment officer.

“It’s a different language, it’s a different way of thinking about things,” he said of the municipal market.

One frustration with the asset class? Size. For all the talk of a deluge in sales, the amount that has been issued this year is less than what corporations sold in November alone.