March 3 (Bloomberg) -- U.S. states and local governments may extend the worst slump in municipal bonds on record as they replace as much as $166 billion of auction-rate securities.
California, Boston's biggest hospital and Duke Energy Corp. are converting their bonds to other types of tax-exempt debt after auction failures drove rates as high as 20 percent. The potential supply equals almost 40 percent of the municipal securities sold last year, overwhelming a market that tumbled 4.9 percent last month, according to indexes maintained by Merrill Lynch & Co., which began compiling market data in 1989.
``When you've got many issuers representing hundreds of billions of dollars trying to restructure their bonds all at once, there's obviously a glut,'' said Paul Rosenstiel, California's deputy treasurer. ``It doesn't make for any easy solutions.''
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