State and local governments continued to issue bonds to finance long-term fixed investment, while covering current expenditures with local taxes and transfer payments from the federal government.

The level of issuance of long-term bonds was about five times levels of 1999-2000, but about 46% of funds raised were used to redeem short-term bonds, in an effort to lock-in low interest rates.

The principal buyers of municipal bonds were property and casualty insurance companies, money market mutual funds, and broker-dealers. Non-profit organizations, included in this category, also issued bonds at record levels ($20.7 billion).

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