New York: Foreign investors increased their US municipal debt holdings almost 50 per cent, to $60.6 billion (Dh222.5 billion), in 2009, the first year of Build America Bonds, according to data from the Federal Reserve.
Buyers categorised as the "rest of the world" more than doubled the value of their municipal holdings since 2005, based on the Fed data, released Friday.
More than $84 billion of taxable, federally subsidised Build America obligations have been sold since their creation by the economic stimulus programme in February 2009, according to data compiled by Bloomberg.
Fixed-income
"The vast majority of that is BABs," said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. "There's little incentive" for overseas investors "to hold traditional munis", which are exempt from US tax, he said.
International investors have been drawn to municipals in search of diversification, said New York-based Philip Fang of Invesco Powershares Capital LLC, who manages an exchange-traded fund that invests primarily in Build America securities.
"The largest of the mun-icipal issuers California, New York those are the ones that really attract the non-traditional buyer," said Fang.
Compared with corporate bonds, "you're getting better quality and in some cases better yields," Fang said. "And there's a whole different level of diversification."
