Despite all the volatility that permeated the tax-exempt market in the second quarter of 2008, the household sector chased higher absolute yields and increased its ownership of municipal debt by 1.3% to $912.4 billion, compared with $900.4 billion in the prior three-month period, according to quarterly data as of June 30 released by the Federal Reserve Board this week.

Households retained their title as the largest holders of municipal debt at a time when there was $2.661 trillion of muni debt outstanding and heavy uncertainty and volatility stemming from the ongoing fallout from the credit crisis, the lack of liquidity and support in the short-term market on the heels of the collapse of the auction-rate market, as well as the exits of both Bear, Stearns & Co. and UBS AG from the municipal market.

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