This year's rally in stocks and slump in Treasury and municipal bonds has set the stage for a spate of tax-loss swaps in the remainder of 2013 that may increase muni selling.

According to a research report from Citi muni analysts, conditions are ripe for retail investors to ratchet up their use of tax-loss swaps, transactions in which they sell a bond that has lost value versus its cost and buy a similar bond in order to realize capital losses and offset gains on their equities.

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