December 11, 2014 / 5:06 PM / 5 years ago

U.S. municipal bond market shrinks to $3.63 trln in 3rd quarter

WASHINGTON, Dec 11 (Reuters) - The U.S. municipal bond market contracted to $3.63 trillion in the third quarter, the smallest amount of outstanding debt in about five years, Federal Reserve data released on Thursday showed.

The total was only slightly less than the second quarter, when all outstanding bonds equaled $3.66 trillion, the Federal Reserve’s quarterly report showed.

Demand from retail buyers appeared to fall alongside supply, with households dropping $155.5 billion of municipal bonds. This marked the 15th quarter in a row that households, the biggest investors in the market, shed their holdings, according to the central bank.

Buying from institutional investors, though, picked up. Banks acquired $34.4 billion municipal bonds in the third quarter, after buying $17.4 billion in the second quarter. Mutual funds acquired $60 billion, compared to $48.7 billion in the previous quarter. Property-casualty insurance companies acquired $2.6 billion and life-insurance companies $4.8 billion. (Reporting By Lisa Lambert)

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