Sophisticated investors are grabbing for high-yield municipal debt whenever they can find it, creating demand for alternatives beyond the Puerto Rico, Detroit, and tobacco bonds that dominate the non-investment grade segment of the secondary market.

Inflows into high-yield municipal bond mutual funds, which grew last week to $235.79 million from $104.1 million the previous week, according to Lipper FMI, demonstrate investors' willingness to seek more attractive returns than currently available in the high-grade market, according to municipal experts.

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