Reduced Tax Burden Sends Bank-Held Muni Debt to Decade Low

US banks are holding the smallest amount of debt sold by states and localities in a decade as a lower tax rate has reduced the appeal of municipal securities.

The banks held $478.7 billion of municipal debt as of March 31, the least since the first quarter of 2015, according to data from the Federal Reserve. Lenders held a record $631 billion of munis at the end of 2021, after a two-year surge in taxable municipal borrowings.

Since President Donald Trump signed a bill at the end of 2017 cutting the corporate tax rate to 21% from 35%, banks have ...