The credit crisis may be spreading from Wall Street to Main Street.
Investors are starting to shun municipal bonds, the debt securities that states and cities issue to fund everything from sewer projects to new schools. Though muni bonds have long been considered among the safest investments, few are buying them because of worries about the safety of bond insurers that back the bonds.
On Tuesday, two muni auctions failed to find buyers, and experts said that was the first time this had ever happened. Conditions have only worsened since then, they explained.
As a result, states, counties, cities and towns around the nation now are being forced to pay sharply higher short-term interest rates, in some cases as much as 15 percent.
Investors, meanwhile, are flocking to U.S. Treasurys, which are backed by the U.S. government.
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