Record municipal bond mutual fund redemptions have emerged as a threat to the rally most market participants expected to kick off early next year, as the anticipated slowdown in the supply of new bonds is met with a wave of selling by mutual funds.

During the week ended Dec. 22, investors yanked $2.9 billion from their municipal bond mutual funds, according to Lipper FMI. Investors have withdrawn $15.2 billion from municipal funds over the past six weeks — the biggest loss of cash over any six-week period in history.

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