Salient to Investors:

Pimco said 5 percent of the Total Return Fund was in municipal debt last month, the first that high a percentage in consecutive months since at least 2006.

City and state debt has returned 3.7 percent in 2012 after accounting for price swings, versus 0.6 percent for Treasuries – would be the second straight year for tax-exempts to beat federal securities, the longest stretch since 2006.

Treasury holdings were reduced to 20 percent last month, the lowest since October 2011, on inflation concern. Mortgages are the biggest holding at 49 percent.

Moody’s says that from 1970 to 2011, an average of 0.08 percent of investment-grade munis sold a decade or more earlier defaulted, versus 2.61 percent for investment-grade company bonds.

Matt Fabian at Municipal Market Advisors said that on an after-tax basis, munis provide a tremendous amount of yield for unit of default risk.

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