As the expiration of the Build America Bond program loomed last year, the market was wracked with uncertainty about just who was going to buy long-term tax-exempt bonds. Thanks to the drought of new municipal bond issuance in 2011, the market is still wondering.

It is far from clear what will happen when municipalities finally come to market with a hefty, or even normal, amount of long-duration tax-exempt supply. Few market participants believe the crossover buyers who have somewhat buoyed the market amid a small amount of municipal supply so far this year can sustain the market permanently. And wealthy retail investors, who form the cornerstone of demand for municipals, have never liked long maturities.

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