Investors are heading into this year still eager for municipal bonds after a 2019 buying binge supercharged returns, the Wall Street Journal reported. High-income households looking for tax relief drove record inflows into muni-bond mutual funds last year, with the S&P Municipal Bond Index up 7.26 percent during the 12 months ended Dec. 31. Some analysts project that muni-bond mutual funds will continue that growth in 2020. In addition to investor demand, a lack of issuance from cities and states has also driven up prices. Following a decade of tight government budgets and new limitations on borrowing, tax-exempt debt outstanding fell slightly in the roughly $4 trillion bond market. Municipal borrowers, barred by the 2017 tax overhaul from accessing the tax exemption for certain early refinancings, instead sold taxable debt, doubling last year’s taxable issuance to about $65 billion and draining tax-exempt bonds from the market. Expectations of continued low rates around the world have left investors willing to pay handsomely for muni bonds, including those that don’t throw off tax-exempt interest.
