(Bloomberg)- The biggest exchange-traded fund tracking the $3.7 trillion municipal-bond market sold this week at the highest premium to the value of its assets since May, an early sign that local debt may avoid a second year of losses.

After the worst year since 2008 for city and state debt, the shift to a premium for muni ETFs points to a potential return to earnings, said Mikhail Foux, a credit analyst at Citigroup Inc. in New York. Local securities may earn 4% to 6% in 2014, he said.

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