In 2003, when local debt declined 4.6 percent in July, the market rebounded with a 1 percent gain in August and a 3.5 percent return in September.
“The relative value of munis should bear out and outperform Treasuries over the coming six to 12 months,” said Alwine, head of muni funds at Vanguard in Valley Forge, Pennsylvania. The company holds more than $100 billion in local debt. “We’ve been looking to add munis at these levels.”
Investors will have an opportunity to buy debt from the states of Washington and Alabama next week, as local governments are set to offer $6.2 billion of bonds, data compiled by Bloomberg show. That’s more than the $5.3 billion pricing this week.
Longer-dated munis have trailed Treasuries even more than their 10-year counterparts. At 4.54 percent, yields on 30-year benchmark munis are about 125 percent of those on like-maturity federal debt, a one-year high.