State and local government bonds dropped by the most in more than three years since the Nov. 8 election amid speculation that President-elect Donald Trump’s plan to slash taxes and unleash a new wave of spending will spur inflation and weaken demand for the tax-exempt securities, Bloomberg News reported yesterday. That’s coming just as municipalities are forecast to keep selling new debt at a swift pace after voters approved at least $55 billion of borrowing at the polls, threatening to put further pressure on prices. The election fallout is threatening to wipe out gains posted in the municipal market this year as the Federal Reserve held off on raising interest rates. Since last week’s election results, the securities have lost 2 percent, cutting this year’s return to 1.1 percent, according to Bloomberg Barclays municipal index. The yields on benchmark 10-year debt soared Monday by 0.2 percentage point to 2.13 percent, the highest since December, before steadying early Tuesday. It was the biggest one day jump since June 2013.
