Banks Reduce Municipal-Bond Holdings for First Time Since 2009
- Lenders cut their stakes by $15.8 billion during first quarter
- Lower tax rates have lessened the appeal of state, local debt
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U.S. banks reduced their holdings of state and local government bonds for the first time since 2009 after the federal government slashed corporate tax rates, making the securities less valuable to one of the market’s key buyers.
Figures released by the Federal Reserve Thursday show that the lenders’ holdings of municipal debt dropped by $15.8 billion during the first three months of the year to $554.4 billion. The reduction marks a pullback from buyers that had been steadily expanding their ownership of state and local government securities since the end of the recession, helping bolster demand.