The leading index of municipal short-term borrowing rates has fallen for the fifth week in a row and is expected to drop further. But as rates have dropped, investors have started to demand only high-grade paper, leaving many lower-rated issuers unable to access the attractive rates, market participants said yesterday.

The Securities Industry and Financial Markets Association municipal swap index, the widely used index based on variable-rate demand obligations, fell to 1.82% last week, continuing a retreat from its record high of 7.96% on Sept. 24.

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