US banks cut back muni exposure to lowest since financial crisis

US banks have reduced their holdings of municipal debt to the lowest level since the financial crisis, with municipal securities now comprising only 1.18% of total bank assets. Despite attractive valuations and low default rates, banks remain hesitant to invest in municipal bonds, influenced by changes in corporate tax rates and concerns over federal funding policies. This cautious approach has contributed to a decline in the value of longer-term municipal bonds, which are yielding more than 94% of US Treasury debt. Analysts note an increase in inquiries from banks as tax policy uncertainties ease.