Broker-dealers ended the first quarter of 2008 with 31.7% more in municipal debt on their books than they had at the end of 2007, according to Federal Reserve flow of funds data that is likely due to the freeze in the auction-rate securities market.

Broker-dealers held $66 billion of municipal debt at the end of March, compared to $50.1 billion to close 2007, according to the recently released data. However, that total remained a small sliver of overall municipal debt outstanding, which increased to $2.66 trillion from $2.62 trillion in the quarter.

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